Ofgem resumes updating household consumption values

Ofgem is to resume updating typical domestic consumption values (TDCVs) for gas and electricity after previously halting the process due to the pandemic.

The regulator assesses domestic consumption and revises the TDCVs if the latest data results in materially different values every two years. Ofgem calculates the typical low, medium and high TDCVs for gas and electricity using the two most recent years of the meter level data.

The latest update was initially scheduled for April 2022 but given the exceptional circumstances of the pandemic, Ofgem decided in 2021 to postpone the update until more data was available to assess the impact of the pandemic on domestic consumption.

Ofgem has published a call for input seeking views on its proposed revised TDCVs which it has calculated by using the latest available two year’s data (2020 and 2021) and taking an average to derive the typical low, medium and high TDCVs for gas and electricity.

However, acknowledging that the data used covers a period including all three lockdowns when domestic consumption increased, Ofgem has also included an alternative approach to remove 2020 from the analysis and use data from 2019 and 2021 instead.

This, it said, resulted in a greater reduction in the alternative TDCVs for medium and high usage customers.

“Whilst this approach would be a discretionary deviation from the established methodology, it could be considered preferable as the outcome is more in line with the longer-term trend of declining domestic energy consumption,” Ofgem said.

As such it is seeking views on whether the impact of the pandemic on consumption in 2020 would justify using the alternative methodology.

Additionally, Ofgem has published its proposals for the consumption split for Economy 7 meters.

In 2019 it proposed an updated consumption split of 59/41, compared to the 2017 split of 58/42. However, this was not considered material and of sufficient value for consumers and Ofgem decided to keep using the 2017 split.

Ofgem’s latest analysis suggests that GB average consumption split for Economy 7 meters to be 60/40 and it is asking for views on whether this change is significant enough to revise the consumption split to reflect this.

The regulator said that updating TDCV values will result in a reduction in communicated typical bill amounts. These, it said, are caused by a change in the underlying assumptions rather than a change in the cost of energy.

To this end, it estimates that the annual bill would be around £35 lower for a medium usage customer on a dual fuel standard variable tariff paying by direct debit.

Ofgem is proposing that these new values be used from 1 October 2023.

The call for input comes as Ofgem published the update for the April price cap, with the regulator confirming an almost £1,000 decrease in the cap level following what it describes as “the fundamental shift” in wholesale energy costs for the first time since the gas crisis began.