Utility Week

Customers VULNERABLE CUSTOMERS 24 | 22ND - 28TH JUNE 2018 | UTILITY WEEK Part 3: pricing E nergy is an essential service, yet many poorer consumers struggle to afford it. Ofgem's latest annual State of the Market report highlighted that poorer consumers are hit hardest by high energy prices, and the situation has got worse. In 2015, the poorest 10 per cent of households spent on average 9.7 per cent of their income on energy, compared with 5.8 per cent of their income in 2005. Low income households tend to use less energy, which means they could be rationing their energy or stopping using it alto- gether in order to save money. In response, the regulator introduced the safeguard price cap, which has covered around four million prepayment cus- tomers since April 2017. It was extended a year later to a fur- ther one million vulnerable cus- tomers on ordinary meters, on a standard variable tariff (SVT) and covered by the Warm Home Discount (WHD). But are price caps the answer? To an extent the answer seems to be yes, but they still Can pricing structures make a difference? don't give vulnerable customers the best deals – because these only come by switching. As Dermot Nolan, chief executive of Ogem, says, the safeguard price cap is designed to protect the most vulnerable, but in the spring the energy regulator had to increase the level, because it said the cost of producing energy was likely to increase. And now as the broader SVT price cap looms (it is set to come into effect in December), there are concerns that while it too is designed to protect the most vulnerable, it may risk putting off suppliers from serving poorer and more vulnerable customers. On that subject, Sara Vaughan, political and regu- latory affairs director at Eon UK, told Westminster Forum's recent energy market confer- ence in London the price cap must include sufficient leeway to reflect the additional costs of serving vulnerable customers. Pointing to figures showing such customers are dispropor- tionately concentrated among the big six, she said: "We don't want a situation where custom- ers in vulnerable situations become less attractive to sup- ply because they cost more and potentially more than is covered Having enough money to pay utility bills can be a big problem for those in vulnerable circumstances. In recognition of this, in the third part of our exclusive series we examine whether new and existing pricing and payment structures, and their associated processes, are providing the appropriate level of help, and whether they're reaching those they're designed to protect. Price caps "It feels like an analogue solution in a digital world" Sara Vaughan, political and regulatory affairs director, Eon UK

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