Citizens Advice response to the Ofgem consultation about an additional debt-related costs allowance in the default tariff cap
Whilst we agree that it is in the interest of customers to allow suppliers as a whole to recover efficiently incurred costs, this consultation does not provide sufficient evidence that the additional funding proposed for debt-related costs is justified. This is because proposals rely upon suppliers’ own estimates of bad debt without proposing any checks or controls on how these estimates are produced. A lower-quartile approach to benchmarking would provide some protection around this, however it is also suggested that this approach to benchmarking could be relaxed at the true-up stage.
In order to ensure consumers have protections against suppliers being funded beyond the level of efficiently incurred costs, the following changes are required:
Review suppliers’ method of estimating bad debt.
Confirm lower-quartile approach to assessing efficiency will be maintained throughout.
Review any changes made to suppliers’ method of estimating bad debt at the true-up stage and make any necessary adjustments.