Ofgem publishes draft consumer vulnerability strategy

Ofgem has today (13 June) published its draft consumer vulnerability strategy 2025 which outlines five areas which the energy regulator will focus on.

Over the next few years Ofgem anticipates that digitalisation, decarbonisation and decentralisation are likely to radically change business models, creating new costs and benefits and capability challenges for consumers.

Furthermore it believes that programmes like the future charging and access review, RIIO2, the future retail energy market review and half-hourly settlement will “fundamentally change” the way the market operates.

It also added that it will consider the appropriateness of either retaining or replacing the default tariff price cap in 2023 at the latest, which is currently subject to a ministerial decision following a regulatory assessment.

Ofgem says it believes the five areas indicate where it can drive “strong improvements” for customers in vulnerable situations.

They include:

• Improving identification of vulnerability and smart use of data
• Supporting those struggling with their bills
• Driving significant improvements in customer service for vulnerable groups
• Encouraging positive and inclusive innovation
• Working with partners to tackle issues that cut across multiple sectors

Writing in a foreward to the online consultation document, Ofgem’s chief executive Dermot Nolan said the market cannot be considered to be functioning well until it is meeting the specific needs of a “wide range of people across a wide range of circumstances”.

Nolan added: “We need to make sure the most vulnerable are adequately protected in this future market. These change programmes, in different ways, will redefine how the energy market functions to bring greater benefits to all energy consumers.

“However, these changes will also raise big questions about how costs are distributed across different groups of consumers and the emergence of potential new consumer risks where these did not previously exist. I’m conscious of the challenges in this area – and know that there are no easy solutions.

“All I can say is that we will do the best we can, given our statutory mandate and statutory powers, and we will work with partners, including government to maximise our impact.”

Meanwhile Mary Starks, executive director, consumer and markets at Ofgem, said: “We want to ensure that the energy market works well for everyone, including those least able to look out for themselves. Supporting and protecting customers in vulnerable situations is a key priority for Ofgem.

“Energy is changing, as the sector rises to the challenge of decarbonisation with the creation of new businesses and business models. We cannot have a situation in which the most savvy and affluent customers benefit from these changes, while others are left behind.

“That is why we want to work with consumer groups and the industry to create a fair energy market for the future.”

The draft strategy is now up for consultation. It will be open for eight weeks and will close on 8 August.

Responding to the publication of the draft document Lawrence Slade, chief executive of Energy UK, said: “We welcome the publication of Ofgem’s draft Consumer Vulnerability Strategy 2025 and look forward to working with them, government and a range of other partners to drive forward this important work.

“The energy sector is committed to going further to improve services for all customers, particularly those in the most vulnerable circumstances, which is why we established the independently-chaired Commission for Customers in Vulnerable Circumstances which has just published its final report.

“We are now looking at their recommendations in detail but we have already committed to bringing forward a new Vulnerability Charter to build on the Commission’s report as well as existing voluntary initiatives.”

Matthew Vickers, chief executive at the Energy Ombudsman, said: “We support Ofgem’s consumer vulnerability strategy out today.

“In our sixth annual consumer action monitor, out later this month, we report that 70 per cent of consumers in vulnerable circumstances choose to suffer in silence rather than escalate a complaint.

“This highlights the necessity for providers to recognise the needs of all consumers and ensure support and protection for vulnerable energy customers.

“Ombudsman Services exists to end consumer detriment and protecting consumers in vulnerable circumstances is central to this.

“We’re currently reviewing and updating our own approach to supporting consumers in positions of vulnerability, ensuring that consumers can access our service regardless of their circumstances.”

Richard Neudegg, head of regulation at Uswitch, added: “Vulnerable consumers should be a priority for everyone involved in the retail energy market, and we particularly welcome Ofgem’s focus on improving targeted support for those who need extra help.

“However, that ambition needs to move beyond the desire for improved understanding and information sharing as set out in the strategy published today.

“There needs to be concrete recommendations for practical action which improve the energy efficiency of housing and provide financial support where necessary, in order to bring tangible improvements to the lives of households who are struggling the most.”

Last month an independent report by the Commission for Customers in Vulnerable Circumstances said the energy sector needs to take “urgent action” to better identify customers in vulnerable circumstances and improve the support given to them.

Formed by Energy UK in February last year, the Commission exists to explore how standards of care and support could be improved across the energy industry. It consists of five commissioners from across the business, charity and consumer advice sectors.

The report found that the current performance of the sector is “inadequate and inconsistent”, adding that the Citizens Advice Extra Help Unit, which is responsible for investigating complaints linked to vulnerability, has had to double its number of caseworkers in the last five years due to the volume of issues affecting customers in vulnerable circumstances.