In May/June the NPC wrote to Ofgem about energy prices and oil fired system. We have now received a response from Ofgem,
The initial letters to Ofgem can be found by clicking on the button below
The response from Ofgem can be downloaded below.
You can read the letter response from Ofgem below
Dear Jan
Thank you for your letters in regard to energy prices (31 May) and oil-fired systems (6 June) on behalf of the National Pensioners Convention.
We know that this is an extremely worrying time for households across Great Britain, especially those who are in vulnerable circumstances, such as pensioners, who are struggling to make ends meet. The energy market has faced a huge challenge due to the unprecedented increase in global gas prices, a once in a 30-year event.
We at Ofgem are continuing to do everything we can to ensure energy companies support their customers in any way they can through these challenging times. The price cap has provided protection for 22 million households, which allows energy companies to pass on all reasonable costs to customers, including increases in the cost of buying gas and electricity.
We empathise with the financial pressures that will arise from the global crisis right now and the impact this will have on all consumers. We have provided detailed information in the annex in response to the points raised in your letters, as well as the advice and help available for consumers.
Ofgem is working to stabilise the market, and over the longer term to diversify our sources of energy which will help protect customers from similar price shocks in the future. This includes working urgently, towards cheaper, cleaner power in Britain. Which means a resilient, low carbon, energy system that will diversify away from our reliance on gas.
Ofgem’s priority has been, and remains, to act in the best interests of energy consumers. Whilst it is an extremely concerning time for many people, Ofgem will continue to engage with the Government, industry and NGOs every step of the way to ensure energy companies support their customers in any way they can.
I hope you find this response useful, and if it would be helpful to discuss the points you raised in further detail, my team would be very happy to arrange a time to speak with you and discuss any further questions you may have.
Yours sincerely,
Jonathan Brearley
Chief Executive
ANNEX
Additional support for pensioners
On 26 May, the Treasury announced help available for millions of households across the UK due to the rising cost of living and energy bills. This includes a pensioner cost of living payment, as well as a £400 rebate for each household with a domestic energy meter. As part of this package.
As part of this package the government also announced a new temporary 25% ‘Energy Profits Levy’ would be introduced for oil and gas companies to help pay for the extra support. These are companies that Ofgem do not regulate, therefore how this levy would be distributed is a matter for Government.
Standing charges
Standing charges are a fixed daily amount consumers pay to cover the costs to supply gas and electricity, no matter how much energy they use. The charges pay for costs that are fixed for a supplier, including service administration fees and maintenance of the energy network.
Under the default tariff cap, Ofgem publishes a ‘nil consumption’ price cap level, which is the amount a supplier must not charge above for a customer who consumes 0kWh. How suppliers choose to set the standing charge and unit rate is a commercial decision which Ofgem does not have a role in, so long as the overall tariff structure does not lead to default customers paying above the relevant cap level for any level of consumption.
We are taking forward work to examine the structure and make up of some standing charges ensuring they are fair for all consumers. In early July, we issued a consultation reviewing how the current costs of supplier failures should be recovered, seeking views on whether the existing fixed charge continues to be appropriate, or if a usage-based (volumetric) alternative would be more suitable.
Prepayment meter customers
The current prepayment meter (PPM) cap level provides for the efficient operating costs of serving PPM customers. This is higher than those that pay by direct debit, as it reflects that it is more expensive to serve PPM customers.
The costs and benefits of the smart meter rollout also differ between direct debit and prepayment customers. The benefits of moving to a smart meter for PPM customers are greater than for direct debit customers. This means we set a different smart meter allowance for PPM compared to direct debit.
Energy efficiency
Many energy companies offer schemes or grants to help with home heating and energy costs. For example, the Energy Company Obligation (ECO) is a government energy efficiency scheme in Great Britain to help reduce carbon emissions and tackle fuel poverty.
The purpose of the scheme is to help eligible customers make their homes more energy-efficient by installing free energy-saving measures and heating improvements. You don’t have to be a customer to join some of these schemes.
Additional information on grants and schemes available can be found further below.
Winter Fuel Allowance / VAT on energy
Any permanent increase to the Winter Fuel Allowance and matters relating to VAT on energy bills are matters for the Government.
Oil fired systems
Ofgem does not regulate oil fired systems, therefore oil costs would not come under the energy price cap. The cost of running oil fired systems or additional help for these households would be a matter for Government.
Help available for households
We encourage anyone struggling to pay for their energy or think they may get into difficulty, contact their supplier as soon as possible. We know that this will be extremely worrying for many people. Ofgem has a page around getting help if you can't afford your energy bills which consumers can visit.
The Citizens Advice consumer service can provide advice on how customers can resolve problems with their energy provider. Citizens Advice can be contacted via webchat, or by calling 0808 223 1133. For complex or urgent cases, or if a person is in a vulnerable situation, they may then be referred onto the Extra Help Unit.