Price cap ‘is leading to erosion of support for vulnerable customers’

The price cap is having a “devastating effect” on the energy sector and is impacting on charities supporting vulnerable customers, according to a director of a major supplier.

Centrica’s Steve Crabb warned at Utility Week’s Consumer Vulnerability Conference yesterday that the default tariff cap, implemented at the start of the year, risked undermining many of the positive steps made by the sector to support those customers most in need.

Speaking in a personal capacity, the company’s director of consumer vulnerability also posed the question as to whether ultimately vulnerable customers should all be served by one dedicated supplier.

Crabb was commenting as part of a panel on how utility companies can make bills affordable for all.

On his thoughts around the price cap, he said: “The anecdotal evidence I am getting is that the price cap is having a devastating effect. Many charities that work in partnership with energy suppliers are saying that their funding is drying up. It’s causing real strain on energy suppliers so I’m worried that the effects of the price cap could see a reversal of a lot of the things that have been done around consumer vulnerability over the past few years.”

Also on the panel was Rob Salter-Church, Ofgem’s director of retail transformation, who was involved in the implementation of the price cap.

He responded: “We believe the price cap is delivering on a lot of the objectives set out. In the first year we expect the tariff cap will save consumers somewhere in the region of £1 billion.

“Another thing it is trying to do is drive efficiencies in the sector. We set the cap at a level that presented a challenge to the sector and that challenge was to become more efficient.

“It’s sad that maybe the place energy companies are going to achieve those efficiencies is to cut some of the support they are giving to vulnerable customers – either directly or through the charities they work with.”

He stressed that Ofgem was committed to keeping the price cap under review and would be monitoring in particular how suppliers treat vulnerable customers.

Later in the debate, the subject of nationalisation of the utilities sectors was raised, to which Crabb said: “I don’t think competition is working terribly well within energy supply if I’m being perfectly frank – just look at the number of companies that have fallen down. Ofgem is saying the right things about raising the bar to ensure that new entrants to the market have got the resilience to continue and understand what they are taking on.

“In 20 years’ time the market will probably be much more dispersed. There will probably be many more municipal energy companies. We are seeing publicly-owned energy companies emerge and I think naturally we will develop more down that route. I welcome that diversity but there does need to be better controls.”

He went on to ask: “Is there a group of customers – for example, those that are disengaged, pension credit customers, those with low educational attainment or learning difficulties – who ought to be taken out of the market all together and placed with one supplier who is charged with safeguarding those customers so we no longer attempt to throw them into the mix? It wouldn’t surprise me if eventually someone decided that was the right thing to do.”

In response, Salter-Church said: “That focus on long-term protections for particular groups of customers post the default tariff cap is one of things that is a priority for us to be thinking about and indeed we have a statutory requirement for us to think about it. That’s just the kind of question we need to grapple with.”