Ofgem consultation on tackling energy debt in the private rented sector

There are several “variable sequences” in the above steps that could give rise to consumer detriment if Ofgem were to proceed, without appropriate mitigations, with the proposal to change a meter to prepay upon a change of tenancy. We discuss these below.

Potential for consumers to pay for energy not used by them

The content of the call for input largely appears to discuss circumstances in which there is no gap in time between two primary occupants. This is likely to be the case where there has been, for instance, a house sale – the original occupant ceases to the be the owner at the same time as the new occupant assumes ownership.

For rented accommodation, however, there will commonly be a gap between the first resident moving out and the new occupant moving in. The landlord or letting agent would be responsible for the energy supply in the interim period. More thinking needs to be done about this latter scenario. The interim period could in some cases be days, but in others could be weeks or months.

This means that for any new requirements Ofgem prescribes there will need to be two separate notifications to the supplier and subsequent sets of actions – the first ending the contract with the original occupant and placing responsibility for supply with the landlord (or letting agent), the second ending that contract with the landlord and placing responsibility for supply with the new tenant. There is otherwise a risk that tenants could become liable for energy bills incurred before the start of their tenancy, or that any nominal credit assigned to the account is used up by the landlord prior to the new tenant moving in.

Tenant moves in before the landlord or letting agent has informed the supplier of a change of tenancy

We understand that Ofgem’s intention is only to allow a meter to be switched to prepay where it is known that there is no occupant. We would welcome confirmation of this as part of future consultations on this topic. Otherwise, a tenant could initially be on a credit-metered supply which is subsequently and without notice switched to prepayment, following the landlord’s notification to the supplier. This could pose a risk of self-disconnection, which could pose a major problem for certain categories of consumer, such as those with essential medical equipment.

Vulnerable cases where setting up an energy account may not be a priority

Social housing providers told us that many of their tenants may be entering a new property at a very difficult time, for instance having lost a previous property or having moved due to domestic abuse. In these circumstances it may not be a priority to contact their energy supplier. It is absolutely critical that the process is made as easy as possible for these individuals. This includes ensuring an awareness campaign is conducted to make sure that everyone is familiar with any new process, and that individual communications are sent that very simply explain how to top up or set up an account. We would also recommend that suppliers are required to take interim steps to keep the supply to a premises live in particularly difficult circumstances, by lodging additional credit on the meter for instance.

We recognise it will not be possible to codify rules such that they can account for every variable sequence without making the regulation unduly complex and burdensome. However, Ofgem must make sure to test any proposals across a range of different scenarios, and ensure safeguards are embedded to prevent consumer detriment across differing event sequences.

Q3: Do you have views or preferences regarding the approach we take to enabling the proposed changes to the supplier home moves process? For example, should the approach be set out in SLCs and / or associated guidance or could it be covered through industry rules or elsewhere?

We recommend the use of SLCs and associated guidance if Ofgem take this policy forward. SLC 7 already sets out related obligations for licensees. For the sake of transparency amendments to this section of the SLCs would provide a clear means to incorporate this policy, accompanied by more detailed guidance to incorporate the regulator’s expectations and consumer protections in more details.

Q4: Do you prefer a outcomes-based approach or something more prescriptive for consumer protections in Change of Tenancy?

Given the challenges of setting out every possible consumer archetype and sequence of events in licence, it appears inevitable that some degree of outcomes-based regulation is required. However, if new change of tenancy procedures are to be successful, it is absolutely essential that suppliers have the systems, processes and workforce in place to enable a new account to be set up with minimal fuss and in a very short space of time. The change Ofgem is considering is a very significant one, and involves a measure of inconvenience for consumers. Suppliers have to live up to their end of the bargain if we are to support this change. It will be totally unacceptable if consumers are unable to quickly contact their supplier to set up an account or restore supply to their home. Where suppliers fail to deliver there should be harsh and immediate penalties – this could be in the form of a Guaranteed Standard of Performance payment, as well as Ofgem enforcement action.

Q5: Do you have any views on the above suggestions for consumer protections or have any alternatives that should be considered?

Sufficiently Informing Consumers

The proposals do not cover how consumers, both tenants and landlords or letting agents, would be sufficiently informed about these changes and the novel process. We recommend that Ofgem consider how to both effectively communicate both the change in the process. This should include both a broad awareness campaign to make sure the change is widely known. This campaign could be led by an industry body like Smart Energy GB, for instance, while engaging closely with consumer advice and advocacy bodies. Careful thought should also be given to individual consumer communications, which should be waiting for the new occupant of a premises when they come in. These must be as simple and straightforward as possible, and ensure they know exactly who they have to call or contact to set up an account, the different payment methods available to them, the information they need to have to hand, etc.

Structural Barriers to Consumer Engagement

Qualitative research on prepayment shows that consumers who move into properties with an existing prepayment meter often feel ill‑informed about the payment method and report limited discussion with suppliers about alternative payment options.[2] Many consumers may not, therefore, actively seek to move away from prepay. While this is not necessarily a problem in itself, as Ofgem reports smart prepay customers tend on average to be the most satisfied cohort of consumers[3], it raises questions about the current communication practices of suppliers. As indicated above, if Ofgem’s changes are to be successful it is absolutely critical that consumers are well-informed of their options, and that the steps for them to change payment method are as simple as possible. As this work progresses we would be more than happy to contribute to the design of effective processes to ensure that in a single call, webchat or website visit a consumer can set up their account in the manner of their choosing.

Challenges for Vulnerable Consumers – Early Identification

Ofgem should give consideration to whether and how vulnerability status can be identified prior to, or early in, the change of tenancy process. Certain vulnerable consumers, including those with health conditions or at-home medical equipment, could face disproportionate harm from potentially unknowing self-disconnection. There are clearly issues around disclosing sensitive information around vulnerability, particularly where the consumer may have no pre-existing relationship with a supplier, and may not be comfortable sharing this information with a landlord or letting agent. Nevertheless, we consider it is worth exploring whether there is a feasible solution that would facilitate early identification of high-risk households. Stakeholders have told us that some suppliers provide online “housing portals” that allow disclosure of tenant information before they move in.[4] This service is not universally provided by all suppliers, requires a landlord to be aware of a tenant’s vulnerability, and to disclose it in a timely manner.

Challenges for Vulnerable Consumers – Notional Credit

Consumer Scotland previously highlighted the cost premium that many disabled and terminally ill consumer pay for their energy, and that working-age disabled and terminally ill consumers are likely to miss out on affordability support to help with their higher bills.[5] Research from health charities highlight that a terminally ill person’s energy bills can rise by 75% after their diagnosis,[6] with one case study highlighting that the additional average estimated monthly cost (before heating and typical electricity costs are accounted for) totalling more than £270.[7] Charities have told us that there are many reasons that a terminally ill household may need to move property during palliative care (such as the need to be closer to health services, or specialist schools to accommodate the needs of terminally ill children).

Given the confluence of risk factors – high energy use and thus higher costs, the absolute necessity of maintaining an electricity and heating supply, and the fact that contacting an energy supplier may not be a priority – the terminally ill and those with health conditions should be an absolute priority consideration in this process. This should be reflected in the level of notional credit that is assigned. Ofgem should consider whether and how consumers with these characteristics can be quickly distinguished from others, and prioritised by suppliers, including by logging additional credit on the meter if more time is required to set up the account. And, more broadly, we cannot assume that every household will be capable of contacting an energy supplier as soon as they move in – a week or two of credit should be the minimum expectation.

Zero standing charge tariff application

We are unclear of the rationale for Ofgem’s suggestion to apply a zero standing charge tariff by default where there has been a change of tenancy. This would have some negative outcomes. It would penalise high users. As outlined above this includes the terminally ill and those with health conditions. It would also potentially allow landlords to avoid all of the fixed costs of the system during the period where the property is vacant. These costs will be borne by everyone else. Furthermore, it would appear to inadvertently necessitate the creation of a zero standing charge variant of the price cap by Ofgem, which we understood Ofgem were not minded to do. The tariff in question would be a default arrangement, and so therefore would appear to be subject to a cap.