Price cap risks supply choice for vulnerable customers, warns Eon

The impending energy price cap risks putting off suppliers from serving poorer and more vulnerable customers, Eon has warned.

Sara Vaughan, political & regulatory affairs director at Eon UK told Westminster Forum’s recent energy market conference in London that the price cap must include sufficient leeway to reflect the additional costs of serving vulnerable customers.

Pointing to figures showing that such customers are disproportionately concentrated amongst the so called ‘Big 6’ incumbent suppliers, she said: “We don’t want a situation where customers in vulnerable situations become less attractive to supply because they cost more and potentially more than is covered under the price cap. If you are hard-nosed, it makes sense to only have those customers that are cheapest to serve: the savvy, agile well off, well-educated customers that give you the lowest cost base.”

Vaughan also called for the scrapping of exemptions for smaller suppliers from the ECO and Warm Homes Discount schemes.

“As the number of smaller suppliers grows, it’s creating a situation of have and have nots. Those customers who haven’t switched and remain with existing incumbent suppliers pick up the costs of paying for obligations on behalf of the more engaged customers who switch.

“We have to ensure there is a level playing field between suppliers by removing ECO and Warm Homes Discount exemptions and Ofgem ensuring suppliers’ costs reflect different customer portfolios and different suppliers’ business models.

“ECO should be a cost of doing business in this market.”

She added that there is a ‘real risk’ that vulnerable customers could ‘unwittingly’ lose access to support under the schemes by switching suppliers in search of a better deal.

Vaughan also told the event that the cap risked holding back innovation when the retail energy market is being transformed by new technological innovations such as half hourly settlements that would enable suppliers to offer more differential pricing

“It feels like an analogue solution in a digital world.”

And she called for the design of the SVT price cap to avoid the errors in the vulnerable customers safeguard tariff, which include ‘ignoring’ the costs of smart meter roll out.

Vaughan also criticised the government for cutting back on the volume of solid wall insulations installations to be carried out as a result of its reforms to the ECO3 energy efficiency scheme.

She said: “The ambition is just not high enough. We would love government to drive more external wall insulation and more help for customers with their energy bills through improving housing stock. If the framework is right people will come into the market.”