Source · Select Committees · Public Accounts Committee
Recommendation 4
4
Accepted
Require Ofgem to ensure supplier regulation promotes customer engagement for behaviour change.
Conclusion
Ofgem risks neglecting the importance of consumer engagement and behaviour change by focusing on penalising suppliers for missing targets. Energy suppliers have binding targets to install smart meters, which should be enforced by Ofgem, the energy regulator. However, energy consumers are not required to accept an offer of having smart meters installed and only one large supplier hit both its 2022 gas and electricity smart meter installation targets. Ofgem is in discussions with suppliers that did not meet their targets, and has previously used its enforcement powers to require an energy supplier to contribute more than £1m to a “redress fund”. It told us it is now considering more severe financial penalties than this. The Department and Ofgem are also in the process of reforming the energy retail market, to increase its resilience whilst enabling innovation that helps support achieving net zero. This may require Ofgem to adapt its regulatory approach, moving beyond merely considering performance against targets, to take account of suppliers’ investment in the innovation and consumer engagement that encourages consumer behaviour change in line with net zero. Recommendation 4: Ofgem should consider how its approach to regulating suppliers, on both the rollout and in relation to net zero more widely, takes account of the need for suppliers to engage their customers to promote behaviour change. Update on the rollout of smart meters 7
Government Response Summary
The government agrees, stating that Ofgem already considers consumer detriment, priority, and Net Zero obligations in its enforcement processes. They also expect energy suppliers to engage customers effectively and that this is factored into Ofgem's consideration of supplier performance against targets.
Government Response
Accepted
HM Government
Accepted
The government agrees with the Committee’s recommendation. Recommendation implemented For instances of possible non-compliance with targets, the Office of Gas and Electricity Markets (Ofgem) will gather information from a variety of sources, some of which is provided directly and some of which is requested via informal and formal processes in line with its Enforcement Guidelines. This includes consideration of consumer detriment, the priority of the issue and, in line with Ofgem’s new duties, the impact on Net Zero obligations before proceeding. Ofgem intends to continue this considered approach into the future and always look for ways to make this process more comprehensive and robust. The department considers that energy suppliers need to engage their customers effectively to convert demand for smart metering efficiently into successfully completed installations. They should be continually adjusting and trialling approaches in response to evolving consumer attitudes, as well as events and emerging opportunities. Those energy suppliers that are doing this more effectively are performing better against their minimum installation targets. In addition, when setting minimum annual installation targets, the department took account of levels of consumer demand over time as smart meter penetration increases. Therefore, a lack of progress in this area can reasonably be taken into account by Ofgem when considering enforcement against energy supplier performance.