Ofgem, Reforming Regulation and Vulnerability

The regulation of the energy supply industry and particularly the approach taken to consumers in vulnerable circumstances is undergoing significant regulatory changes. The starting point came with Ofgem’s publication of its consumer vulnerability strategy in 2013, the first regulator to produce such a document. Further impetus has come from Ofgem’s long-standing desire to rely more on principles based regulation and the remedies package of the Competition and Markets Authority (CMA) following its market investigation into the energy markets, particularly in relation to prepayment meters (PPMs). This article looks at one aspect of the proposed changes: namely Ofgem’s recent proposal to add a broad enforceable vulnerability principle into the standard licence conditions of energy suppliers. Before discussing the proposals, it is worth providing some background and context to them. THE REALITY OF VULNERABILITY There has been substantial debate over the definition and subsequent measurement of fuel or energy poverty with the latest statistics showing that there are 2.38 million households in England in fuel poverty. However, focusing on this obscures the issue that there are large number of people in other circumstances which may also place them significant risk of vulnerability. There are, for example, some 11 million people in Britain with a disability, 6.5 million people in the UK who function as carers, around a million adults have a literacy level of a 5-7-year-old (there is an equivalent, probably worse numeracy problem) and just under 5 million people in the UK over the age of 75. This is without considering that vulnerability may also be transitory, and/or triggered by life events such as divorce, bereavement, illness or loss of employment. Vulnerable consumers do not constitute a separate or static part of the population. There are a range of multi-dimensional factors which contribute to the risk of consumer vulnerability and understanding these factors is essential to identify and address the issues facing such people in the energy sector.