Regulation of vulnerability
Recognising the need to improve the ways service providers identify, engage and communicate with these customers, industry regulators Ofgem and Ofwat regularly provide guidance to their respective industries. Ofgem first published its Consumer Vulnerability Strategy in 2013 and has continued to focus on the following three core areas:
- Fair Outcomes – to eliminate disconnections associated with debt, enforce the concept of the vulnerability principle, and introduce price measures aimed at protecting consumers.
- Greater market transparency – to benchmark progress through the publication of market reports.
- Tougher compliance and enforcement action – to ensure providers are held to task and penalised if they fail to comply with the protections put in place for vulnerable customers.
The regulator updated its Consumer Vulnerability Strategy in October 2019, setting out its priorities up until 2025 and the outcomes it wishes to see, while Ofwat’s Consumer Strategy review, which captured responses from 36 stakeholders from water companies to customers to charities and was published in May 2019, is also focused on delivering more for customers.
Five year goals
Ofgem’s Consumer Vulnerability Strategy identified five core themes which now form the basis of its plans for the next five years. It now expects energy providers to...
- Improve the identification of vulnerability and smart use of data. Companies need to more effectively identify and help the people who need assistance by keeping the PSR up to date. They can do this through promoting self-identification and utilising and sharing smart meter data.
- Support those struggling with their bills. Vulnerable customers are more likely to be disengaged so companies should seek to assess affordability, put in place measures to support those at risk (including those likely to self-disconnect), ensure payment plans are affordable and seek to maintain communication effectively. Steps should also be taken to help off-gas customers move onto the gas network to lower their energy bills.
- Drive significant improvements in customer service for vulnerable groups. The diverse nature of vulnerability and resistance to engagement means companies need to seek to ensure a positive customer experience by tailoring their approaches and avoiding exclusion. New entrants to the market will need to adhere to a new set of licence conditions to bring their level of customer care up to standard and a similar licence will be applied to gas distribution companies and Distribution Network Operators. The PSR should be promoted to improve awareness and companies need to provide information on how they support vulnerable users as part of the information they supply for switching.
- Encourage positive and inclusive innovation. Technological advances can create exclusion, particularly when it comes to the less digitally savvy, so companies need to ensure access to products and services is maintained when innovating.
- Work with partners to tackle issues that cut across multiple sectors. Cross industry issues such as affordability, customer service and identification mean it makes sense for utility companies to share PSR data both within the sector and with charities. Ofgem is also committed to working with government social programmes to effect change and avoid gaps in service.
Ofgem stresses that these five priorities are not ‘optional areas for work’ and should determine the products and services that energy providers develop. It intends to monitor all five areas using a new framework and to publish the results annually in the Vulnerable Consumers in the Energy Market report and the Consumer Impact report.