Ofgem faces court clash over price cap hike

Ofgem has been threatened with legal action if it does not shield vulnerable customers from this autumn’s price cap hike by reintroducing a social tariff for ‘at-risk’ groups.

The Good Law Project (GLP), alongside the Fuel Poverty Action campaign, has sent a formal pre-action letter to Ofgem demanding that it protects vulnerable customers from rising energy costs when it next updates the price cap. An announcement by the regulator is due on 26 August.

The pre-action letter has been sent as a precursor to a judicial review by GLP of a decision that is expected to substantially increase electricity and gas bills.

The GLP, whose director Jo Maugham played key role in legal efforts to derail Brexit, said Ofgem is failing in its legal duty to protect vulnerable people by announcing no plans to impose a separate, lower price cap for those customers under powers given to the regulator following privatisation in the 1980s.

GLP said it had asked Ofgem in July to confirm that it would not raise the cap without properly assessing the impact an increase would have on vulnerable groups,

The letter raised “serious concerns” about the way that Ofgem is conducting its upcoming review of the price cap.

It argued that the “substantial” increase, due to be introduced at the beginning of October, is unlawful in the absence of an equalities impact assessment, especially given that it is likely to “disproportionately” affect vulnerable groups, like the elderly and the disabled.

The letter stated that Ofgem’s position that an impact assessment was conducted when the cap itself was introduced in 2018 is “untenable” because of the “significant and unforeseen material changes of circumstances” as a result of volatility in the energy market.

Maugham said: “Ofgem has the power to protect vulnerable people from the devastating increases in energy costs and we think they should use them. Having failed to properly assess the risks, they don’t seem to be planning any steps to protect vulnerable groups.

“We hope we’re wrong and that Ofgem is doing all this behind the scenes. But we don’t want to wait for their 26 August announcement to find out. We’ve put them on notice that if they don’t properly comply with their legal duties before announcing the next increase, we’ll be ready to challenge it straight away.”

An Ofgem spokesperson said: “Ofgem’s priority is to protect consumers and we know that people are currently under huge pressure as bills continue to rise. We will keep working closely with the government, consumer groups and with energy companies on what further support can be provided to help with these higher prices.

“We can confirm that Ofgem has received a letter from the Good Law Project and we will reply in due course.”

The reintroduction of social tariffs for vulnerable customers was recently endorsed by the House of Commons Business, Energy and Industrial Strategy Committee.