Consumer Scotland responds to Ofgem Future Price Protection Discussion Paper

Consumer Scotland published its response to Ofgem's Future Price Protection Discussion Paper call for input on 13 May 2024, recommending that the Consumer Principles be used as the framework for developing future price protection in the retail energy market¹.

The response notes that the energy price cap has played an important role in protecting consumers since its introduction in 2019. It says the cap was initially designed as a safeguard against the loyalty penalty and later acted as a vital price protection mechanism during the period of unprecedented price rises in the wholesale market¹. It adds that energy markets are changing, resulting in new and different ways for households to use and pay for energy, and that Ofgem's discussion paper recognises the future of pricing needs to be looked at in the round, including the structure of billing, making standard default tariffs more flexible, understanding the needs of those who are struggling or vulnerable, and protecting those who are not actively engaged in the market¹.

Ofgem describes its existing price protection arrangements as having three key parameters: flat, universal and stringent. The response states that attempting to deliver all three is likely to be increasingly challenging in a retail market with increasing customer diversity and the need for trade-offs, and that the regulator proposes relaxing any one of the three parameters in the design of future price protection¹.

Consumer Scotland sets out how it applies the Consumer Principles to the future retail market¹:

Consumer Principle	Future retail market context
Access	Consumers feel enabled to access the benefits of future retail market offerings, and are protected where they cannot or choose not to
Choice	Consumers have sufficient choice (e.g. when choosing tariffs, technology, etc.) that works for them and their circumstances
Safety	Consumer protections that keep pace with market developments and maintain essential safeguards
Information	Consumers are empowered to make informed decisions related to new market arrangements
Fairness	Consumers are part of an inclusive energy market designed to meet the varying needs of consumers, including sufficient price protection
Representation	Consumers can be active participants in how goods and services are designed and delivered, including through advocacy and advice
Redress	Consumers have routes to redress in the future market when things go wrong, underpinned by reformed standards of practice

The response says the Consumer Principles are based on frameworks developed over time by UK and international consumer organisations, and that reviewing policy options against them enables more consumer-focused policy and practice¹.

"For this response, have used the Consumer Principles as a lens through which to review the changes required in the future retail market, of which the future of price protection is a part"

Consumer Scotland, Ofgem Future Price Protection Discussion Paper: Call for input¹

Consumer Scotland recommends that Ofgem place consumers at the centre of the process by reviewing policy options against the Consumer Principles, and by setting out a clear articulation of intended consumer outcomes, including a distributional analysis of the socio-economic impact of any reforms tested against a range of different consumer archetypes¹. It welcomes the discussion and recommends that any analysis of policy options gives a central focus to positive consumer outcomes¹.

Why it matters for households

The price cap sets a limit on the unit rates and standing charges that suppliers can charge domestic customers on default tariffs, so any redesign of price protection affects what households pay for gas and electricity. Ofgem's discussion paper covers the structure of billing, more flexible standard default tariffs, the needs of consumers who are struggling or vulnerable, and protection for those not actively engaged in the market¹. Consumer Scotland's response concerns how those changes are assessed rather than setting out new rates or dates. The three parameters under discussion, flat, universal and stringent, describe the shape of existing protection, and Ofgem proposes relaxing one of them¹. No decision on which parameter would be relaxed, and no timetable for reform, is set out in the response.

What happens next

The response was first published and last updated on 13 May 2024¹. No further steps, consultation dates or implementation dates are given in the response. Ofgem's own discussion paper is cited as the call for input to which Consumer Scotland was responding¹. Further detail on how the retail energy market is regulated is available in the regulation and policy section.

Sources1 cited