Ofgem has revealed plans to further expand the reach of its safeguard tariff for vulnerable customers.
The regulator says it now intends to require all well-established suppliers with more than 50,000 customers to offer the tariff, if it is extended to a wider pool of low-income households later this year.
The safeguard tariff was introduced in April 2017 to protect the 4 million customers on prepayment meters, and in February was broadened to cover another 1 million customers who are automatically eligible for the Warm Home Discount (WHD).
In December, Ofgem proposed to extend the tariff to another 2 million vulnerable customers who are not automatically eligible for the scheme.
The regulator suggested two different methods for identifying these vulnerable customers. Its preferred approach is to provide protection to customers who qualify for certain government benefits. This would require a new data-matching exercise between the Department for Work and Pensions (DWP) and suppliers, enabled by changes to the Digital Economy Act.
Ofgem said it could be difficult to implement this option in time for the coming winter. It therefore suggested a backstop approach, which would see suppliers identify vulnerable customers based on information they already hold. Eligible customers could include those who are signed up to priority service registers or those who are in debt.
At the time, the regulator said only large suppliers with more than 250,000 customers, who are therefore obligated to offer the WHD, should be required to put vulnerable customers on the safeguard tariff.
But Ofgem has now said that medium-sized suppliers – those with more than 50,000 customers who have been active in the energy market for at least three years by the next winter – should also be required to offer the tariff and publicise its availability.
They would be obliged to manually process requests from customers claiming eligibility. Unlike the larger suppliers, they would not have to identify and automatically sign up vulnerable customers using their or the government’s data.
The regulator has published a consultation on the latest proposals, along with a set of draft supply licence amendments needed to enact the extension. The new licence conditions require the larger suppliers to prepare for the data-matching exercise with DWP by putting in place the necessary operational capabilities in terms of IT systems and staffing.
The safeguard tariff is designed to be temporary, dropping away once the government’s proposed market-wide price cap on standard variable tariffs and other default tariffs comes into effect.
Ofgem expects to make a decision on whether or not to proceed with the proposed licence modifications in June once it has a clearer idea of when the default tariff cap bill, currently being debated in Parliament, will be passed into law. The regulator is aiming to implement the default tariff cap by the end of this year, rendering the latest proposals unnecessary, at least for the time being.
If they do go ahead, suppliers will have at least 56 days before they are legally required to comply with the new licence conditions. However, the regulator has also urged those affected to begin preparations immediately, including liaising with the DWP.
Even if it is shelved before the extension is introduced, Ofgem said the safeguard tariff may be needed again when the default tariff cap ends. It said the preparatory work for identifying vulnerable customers could therefore provide valuable lessons for the future.
The deadline for responses to the consultation is 31 May.
At the beginning of April, Ofgem hiked the safeguard tariff for dual fuel customers by £57 to £1,089 per year to reflect rising energy costs.