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Regulatory update: Consumer Vulnerability Strategy 2025

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Background

On the 13th June 2019, Ofgem opened its 'Consumer Vulnerability Strategy 2025' to consultation.

This document builds upon work delivered since 2013, setting out the regulator’s priorities in helping protect gas and electricity consumers in vulnerable circumstances over the next six years. The strategy is informed by discussions with stakeholders across the country, interviews with experts and responses to the open letter published in December last year.

It should come as no surprise that protecting consumers in vulnerable circumstances remains a key priority for Ofgem – in fact, for all UK regulators. Within energy especially, a sector that delivers services essential to life, looking after vulnerable customers is even more critical.

“Energy is an essential service that affects people’s comfort and health, and 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.” says Dermot Nolan, Ofgem’s Chief Executive Officer.

Earlier this month, Energy UK’s Commission for Customers in Vulnerable Circumstances released their 'Final Report 2019', detailing its expectations of utilities regulators and suppliers. Many of the themes outlined in this will be familiar to anyone reading Ofgem’s Strategy.

Since the 2013 strategy, Ofgem report that they have improved consumer outcomes by eliminating disconnections for debt, introducing an enforceable vulnerability policy and introducing default price caps, among other developments. The regulator has also taken a tougher stance on compliance and enforcement since the publication of the 2013 strategy.

The utilities markets of the future will, no doubt, look very different to those of today. The regulator makes particular note within the document that “digitalisation, decarbonisation and decentralisation are likely to radically change business models, creating new costs and benefits and capability challenges for consumers.” As such, Ofgem will consider the appropriateness of “retaining or replacing the default tariff price cap in 2023 at the latest”.

The regulator intends to dedicate itself to five key “themes” in which it believes it can deliver improvements for customers in vulnerable circumstances. These include:

  • Improving identification of vulnerability
  • 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

As part of this, Ofgem will work closely with government on policy areas, such as social security and fuel poverty policy, that affect their role as regulator.

Next Steps

Consultation is open until the 8th August 2019. Ofgem will then publish non-confidential responses, along with a decision on next steps, soon after.

Ofgem plans to publish reports on its progress in its five key themes in annual 'Vulnerable Consumers in the Energy Market Reports' and 'Ofgem Consumer Impact Reports'.

Considerations for suppliers

For each of the five key themes outlined above, Ofgem has identified desired outcomes for customers (detailed in the strategy) with corresponding measures that it wants to see achieved over the lifetime of the strategy.

For example, what Ofgem would want to see under the “supporting those struggling with their bills” theme would be better support for customers who are at risk of "self-disconnecting" and a decrease in such disconnections. Under “driving a step change in customer service for vulnerable groups” it would want companies to tailor their customer service to consumers with specific needs. 

Firms will now have to consider how they will meet the outcomes that Ofgem has laid out for each theme. There are 18 outcomes across the five themes, with most calling for urgent action from energy suppliers. Appropriate policy, process or procedural change to meet theses outcomes, as well as to measure their effectiveness, will be key to supporting customers in vulnerable circumstances and evidencing compliance. Ofgem will be closely monitoring firms' performance against the outcomes.

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