Protection from energy cost hikes

Good Law Project will take Ofgem to court if it fails to comply with legal duties to protect vulnerable customers

Katie Hill - Editor-in-Chief, My Green Pod

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Published: 19 August 2022

This Article was Written by: Katie Hill - My Green Pod

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Good Law Project (GLP), alongside Fuel Poverty Action and the chair of the Highlands & Islands Housing Associations Affordable Warmth Group, has sent a formal pre-action letter to Ofgem demanding that it protects at-risk groups from rising energy costs in advance of its increase to the energy price cap due to be announced on 26 August. 
 
One of Ofgem’s core functions is to protect the interests of consumers from energy companies making excessive profits and it has a specific legal duty to protect vulnerable groups. 

The energy price cap

It has been predicted by Cornwall Insight that the energy price cap will be increased to £3,582 from October, a 180% increase on the same time last year.

While energy companies are currently making record profits, a recent report has found that 35 million people in 13 million households – 49.6% of the UK population – are now under threat of fuel poverty in October 2022, owing to a combination of energy price caps and inflation. 

A social tariff?

Ofgem has the powers to impose a ‘social tariff’ – a separate, lower price cap for vulnerable users – but it hasn’t announced any plans to do this. Good Law Project believes Ofgem is failing in its legal duty to protect vulnerable people.
 

‘Ofgem has the power to protect vulnerable people from the devastating increases in energy costs and we think they should use them. Having failed to properly assess the risks, they don’t seem to be planning any steps to protect vulnerable groups. We hope we’re wrong and that Ofgem is doing all this behind the scenes. But we don’t want to wait for their 26 August announcement to find out – we’ve put them on notice that if they don’t properly comply with their legal duties before announcing the next increase, we’ll be ready to challenge it straight away.’

JO MAUGHAM
Director of Good Law Project

No formal impact assessment

In July, GLP asked Ofgem to confirm that it wouldn’t raise the cap without properly assessing the impact an increase would have on vulnerable groups.

In particular the elderly, the disabled, those in rural areas, people on pre-payment meters and people in ‘off-gas’ areas (those without a mains gas connection whose costs are much higher).

GLP also asked for assurances that Ofgem would take steps to mitigate those impacts.
 
Ofgem’s position was that it didn’t need to carry out a formal impact assessment as one was done in 2018.

The regulator considers the best way to protect people is by stabilising the market so that suppliers don’t fail.

However, Ofgem admitted on 04 August that there is ‘a risk that the price cap at this level could result in some suppliers being in a relatively healthy cash position’.
 
The claimants have given Ofgem until 26 August to respond. 

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