Non-switchers must be protected from SoLR costs

Energy customers who do not switch supplier should be protected from the costs of retailer failure, the head of the Fuel Bank Foundation has argued.

In a letter to Ofgem’s chief executive Jonathan Brearley, Npower’s former head of policy and customer vulnerability Matthew Cole highlighted how in December 2021 his charity saw the highest level of demand since it was founded in 2015.

Cole added that the charity’s client base is expanding in both “depth and breadth”, with existing clients needing more help and more people seeking support who have never previously experienced fuel poverty.

One such measure he proposed to address the issue was protecting ‘non-switchers’, people who tend to be the most vulnerable, from the socialised cost of supplier failure.

Ofgem revealed in December that it was allowing recently appointed Suppliers of Last Resort (SoLR) to claim back £1.8 billion in Last Resort Supply Payments (LRSP) to help them cover the costs of taking on more customers.

Cole however said those who do not switch may not have benefited from savings in the past. Speaking to Utility Week, he explained his thoughts further.

He said: “Around 99% of the people we support pre-pay for their energy. We know that even if you are quite savvy there hasn’t really been a variety of tariffs for prepayment meter (PPM) customers to choose from.

“In the past, there was some criticism of the market being complicated by there being hundreds of tariffs to choose from. That was never the case if you were a PPM customer, there was never really such a wide choice.

“For those customers who pre-paid for energy, even if they were savvy, banked online and use comparison sites to compare home insurance, they could never take advantage of the market in the way that direct debit paying customers could.”

In response to the unprecedented number of supplier failures, Ofgem recently proposed to spread the cost of LRSPs  to reduce the short-term impact on energy bills.

Under the plans retailers would be permitted to sell their rights to LRSPs, which enable them to claim back costs incurred by becoming a SoLR but can take months or years to come through, to third parties.

This would allow suppliers to receive the money faster but allow the costs of the payments, which are made by distribution networks and recovered through their charges, to be spread out over a longer period.

Responding to the charity’s letter, an Ofgem spokesperson said: “We thank the Fuel Bank Foundation for their letter. It raises some important points and we will respond in due course.”