Energy Price Guarantee extended to end of June 2023

The Energy Price Guarantee (EPG) was extended to the end of June 2023, Consumer Scotland said in a response to an Ofgem call for input on the debt-related costs allowance in the energy price cap, published on 17 May 2023¹. The extension is referred to in the section of that response dealing with recent market developments, alongside the Energy Bill Support Scheme (EBSS) and changes to the practice around involuntary prepayment meter installation¹.

Consumer Scotland is the statutory body for consumers in Scotland, established on 1 April 2022 under the Consumer Scotland Act 2020 and accountable to the Scottish Parliament¹. Its response sets out its position on how Ofgem should treat debt-related costs within the energy price cap, the mechanism that limits what suppliers can charge per unit of gas and electricity¹.

The response states that the most recent cap period allowed for debt-related costs representing 6% of typical dual fuel standard credit bills, 1% of typical dual fuel direct debit bills and 0.4% of dual fuel prepayment meter bills¹. Consumer Scotland said this structure, calculated on the basis of debt risk between payment types, "does not reflect a principle of fairness", and that it would like to see parity of debt-related allowance between direct debit and standard credit consumers¹.

The response also cites Consumer Scotland's own research on affordability by payment type.

On government support, Consumer Scotland said the EBSS and EPG interventions are likely to have lowered debt-related costs incurred by suppliers, but that this has to be viewed within the wider context of the cost of living crisis¹. Its research found one-third of consumers reported not managing well financially, 35% reported it was difficult to keep up with energy bills and 68% reported rationing their energy use¹. It said there may be more customers in debt because of the wider cost of living crisis¹.

The response also notes Scottish Government support outside the UK-wide scheme. In May 2023, the Scottish Government announced its own £10m extension of the Fuel Insecurity Fund, which directs consequentials from the UK Government's Household Support Fund to vulnerable households, with energy debt applications administered through the Home Heating Support Fund¹. A second initiative, the Social Housing Fuel Support Fund, issued 15,986 fuel vouchers to July 2022 at a total value of £783,314; figures for its third round were due to be published in July 2023¹.

Why it matters for households

The EPG is one of the mechanisms that has limited the amount households pay for each unit of gas and electricity, and its extension to the end of June 2023 means that limit applied for longer than it otherwise would have¹. The debt-related costs allowance sits inside the energy price cap and is recovered through bills, so how Ofgem distributes it between payment types affects what standard credit, direct debit and prepayment meter customers each pay towards supplier bad debt¹. Consumer Scotland's figures show the allowance currently falls most heavily on standard credit bills at 6% of a typical dual fuel bill, against 1% for direct debit and 0.4% for prepayment meters¹. Its evidence also indicates that standard credit customers report more difficulty keeping up with bills than direct debit customers, though fewer than prepayment meter customers¹. Households in Scotland may also be affected by the Fuel Insecurity Fund and its associated debt write-offs, which are administered separately from the UK-wide scheme¹.

What happens next

Consumer Scotland said it has not taken a view on questions 11 to 15 of the call for input, but is comfortable with Ofgem working towards an October 2023 cap adjustment if that is the decision taken¹. Figures for the third round of the Social Housing Fuel Support Fund were due to be published in July 2023¹. No further detail on the EPG's position after the end of June 2023 is given in this response¹.