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StepChange response to Ofgem consultation on additional debt-related costs allowance - November 2023

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We responded, welcoming that this consultation recognised the close connection between the ability of suppliers to deliver high standards of responsible debt collection and the energy funding model for suppliers.

We also called out our disappointment that – in light of continued high energy costs and increasing levels of energy arrears – the government and Ofgem have not acted urgently to provide temporary support to help people struggling with energy debts and make progress towards implementing a social tariff for energy.

We fully support higher standards Ofgem has recently set when it comes to customers struggling with energy arrears, including the previous mandatory PPM moratorium and Ofgem’s subsequent revisions to consumer standards in license conditions and guidance.

However, this consultation acknowledges the link between funding and suppliers’ ability to meet high consumer standards. Put simply, providing forbearance and affordable repayment, and pausing debt collection from those in arrears in vulnerable situations, carries a cost to suppliers that must be accounted for somewhere in the funding model.

It is very likely the true cost of responsible debt collection in the energy market has not yet become clear. Questions raised in this consultation, like the prospects of a specific levy mechanism for ‘do not install’ (DNI) customers, strongly indicate that the present price cap model does not enable suppliers to adequately protect customers in vulnerable situations. In fact, the proposals reflect the reality that the cost of supporting vulnerable and fuel poor customers is passed back to the same households through bills in a regressive way.

We responded to say we strongly believe more holistic reform of the energy funding model is needed to deliver affordability to those at risk of fuel poverty, provide sufficient protection and assistance to those struggling with energy debts, and to properly meet the cost of responsible debt collection.