Citizens Advice response to Ofgem open letter on protecting credit balances and Renewables Obligation payments
We support Ofgem’s ongoing work on energy supplier resilience, following the unprecedented turmoil we saw in the market in 2021. With over 4 million customers affected directly by supplier failures, and a total cost to bill payers of at least £2.5 billion, it is vital that reforms are put in place that rebuild consumer trust and prevent a similar crisis in future.
At this stage of the policy development our key views are that:
We continue to support policies that reduce the risk of these mutualised costs, and reduce the cost of supplier failures more widely by preventing risky business practices. Various options for reform have been looked at extensively since 2018, and should not be delayed further.
Ofgem should seek to limit the costs of these reforms while maximising consumer benefits. We look forward to an impact assessment of options at the next stage of consultation, taking account of the costs to different types of suppliers, impact on prices, and direct and indirect benefits to consumers.
We would also welcome more detail on why previous options to protect credit balances have not been taken forward. Of the options presented at this stage we are minded to support Ofgem’s preferred approach, subject to a detailed impact assessment.
Ofgem should ensure the reforms incentivise suppliers to improve their billing practices, and we also support consideration of new rules on billing. This should form part of a larger review to improve standards and introduce a new FCA-style Consumer Duty.
Ofgem is simultaneously progressing various reforms with somewhat overlapping impacts on supplier resilience, though other measures are currently at a more nascent stage. Ofgem should use the proposed transition period before its mutualisation protections are implemented to assess the appropriate combination of enduring measures.