Citizens Advice response to Ofgem's call for input on the future of domestic price protection

Citizens Advice response to Ofgem's call for input on the future of domestic price protection 153 KB

Citizens Advice welcomes Ofgem’s timely review of the future of price protection. This is an opportunity to consider how this will need to change in future to accommodate market reforms, and also apply lessons from the current approach to setting the price cap.

Following Marketwide Half Hourly Settlement (MHHS) we expect suppliers to offer more Time of Use (ToU) tariffs. While this will help deliver the overall benefits of a more flexible system, these changes will also give rise to new distributional impacts and some new risks. They could push up the cost for individual suppliers of providing default products, and require the price cap to be set at a higher level, to ensure suppliers whose customers on default tariffs who use most energy at peak times can recover their efficient costs.

The scale of these risks and the speed at which they could develop is not currently clear. Further modelling is needed to underpin an assessment of which policy approach is the best way forward in the near term. However, to help ensure that costs of net zero transition are being recovered fairly and that loyalty penalties are not re-emerging, we think there is a need for ongoing protection for all consumers on default products, though the form of this protection is likely to need to change for some products.