Utility Week

Customers UTILITY WEEK | 15TH - 21ST JUNE 2018 | 25 Regulatory and policy uncer- tainty hit the vulnerable hard- est. And it would be foolhardy to talk about either of these without first mentioning Brexit. This is a watershed moment for regulatory policy because once outside of the EU (and its single market and customs union), the UK will have to become more competitive and raise productivity at a faster rate than the remaining EU27. And this has the power to directly impact vulnerable customers. As a report published by the House of Lords EU energy and environment sub-committee in January warned: "It is likely that the UK's withdrawal from the EU will lead to less efficient energy trade, which could in turn increase the price paid by consumers for energy security. We call on the government to conduct and publish an assess- ment of what impact leaving the Internal Energy Market Be decisive not divisive: uncertainty hits hard Regulation needs a fluid approach. Increasingly, UK policymakers are realising that flexibility is necessary to meet the needs of a diverse customer base, and now recognise the needs of vulnerable customers more than ever. But this does not diminish the ongoing challenges associated with regulating accordingly. Flexible regulation is vital, because vulnerability can come in a broad range of guises. It can be temporary, sporadic or permanent in nature, and is a fluid state that needs a tailored response. As an example, policy arrangements around temporary delegation (enabling a family member or carer to manage your affairs for a short time) and accompaniment (sitting in Joanna Elson OBE, chief execu- tive of the Money Advice Trust, the charity that runs National Debtline, says nearly one in seven of the people they help has an energy debt. "Our advisers hear on a daily basis the impact vulnerable circum- stances can have on someone's financial situation." But as to how policy and regulation should react to these circumstances, she says: "While it is positive that energy sup- pliers oen recommend free, independent debt advice to their customers, more needs to be done to pick up the signs of financial difficulty earlier and before arrears build up." In recognition of this issue, Ofgem wants energy suppliers to step in sooner to help custom- ers manage debt, it announced Be more flexible: one size doesn't fit all Prevent and deal with debt: early detection is key would have on the price paid by consumers for their energy, and to take steps to mitigate this impact, particularly for finan- cially vulnerable consumers." But policy uncertainty in general is bad for consumers, and particularly those on the lower rungs of the economic lad- der. Without significant policy and regulatory reform, the future energy market risks becoming a two-tiered system that favours those who can access and afford distributive energy resources (such as solar panels) and those who cannot, which would only act to exacerbate the already widening gap between the haves and the have-nots. As to how to avoid such uncertainty, without meaning to drastically simplify the issue, the answer is twofold: Brexit clarity and a nuclear decision. Failure to commit to a nuclear strategy will hinder the UK's ability to develop low- carbon energy, which has huge implications for the market as a whole, but vulnerable customers too. This is because participation in energy efficiency and time- of-use tariffs can allow vulner- able customers to change their energy consumption away from peak demand periods to benefit their pockets and the network, by deferring or avoiding network reinforcement. And as energy policy costs are applied to household elec- tricity and gas bills, equating to £132, or 13 per cent, of the average energy bill, low-income households are hit hardest by the current arrangements because the poorest households spend 10 per cent per cent of their income on heat and power in their homes, whereas the rich- est households spend only 3 per cent, so any increase in prices hits the poor disproportionately. Returning to Brexit, the biggest energy question for the industry is how long the UK will remain part of the nuclear research, training, and regula- tory body Euratom. Uncertainty on the issue will mean fleeing or dwindling investment, or inves- tors seeking to factor in the risk of uncertainty, which in simple terms will mean higher taxes and larger energy bills – which will hit vulnerable customers in the wallet the hardest. The BEIS select committee said in February that policy concerns have been exacerbated since the vote for Brexit. And Chatham House estimates that incoming investment may have declined by 10 per cent follow- ing the referendum vote. The key now is therefore communicating plans to investors efficiently and avoiding any mixed messages. or helping with a phone call or interview) must be sufficiently flexible so as to enable family and carers to help. In response to this ongoing need, water regulator Ofwat has made affordability one of the four key themes of its PR19 price review – it has insisted water companies demonstrate how they intend to provide flexible support and services for custom- ers. Meanwhile, energy regulator Ofgem has warned that energy suppliers will be "called to account" if they fail to provide vulnerable customers with the "proper care" they deserve. This may sound vague, (and reminis- cent of the 'all reasonable steps' cited with regard to suppliers offering smart meters to consum- ers before the looming deadline in its smart meter rollout edict) but this is perhaps a reflection of the fact that "proper care" with regard to vulnerable customers is very much a moveable feast, and changes considerably from case to case. in October of last year. Under new rules introduced around the same time, energy suppliers must make extra efforts to treat vulnerable customers fairly. "Paying off energy bills is a major concern for many custom- ers in vulnerable situations," Rachel Fletcher, Ofgem's senior partner for Consumers and Com- petition, said at the time. "When suppliers let big debts accrue, it's a sign they're not spotting debt or stepping in early enough to help customers who are struggling to pay bills. We want the industry to demon- strate that it is identifying and supporting these customers in a timely way. We will be monitor- ing suppliers to make sure they make long-term improvements on bringing down debt." But talk can be cheap, so how has this best-laid plan progressed? Ofgem says it has seen some improvements from suppliers, as more customers with debts of less than £100 are managing continued on page 27

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