Source · Select Committees · Business and Trade Committee
Recommendation 17
17
Acknowledged
Paragraph: 76
We are concerned that the costs of the Supplier of Last Resort process, which has...
Conclusion
We are concerned that the costs of the Supplier of Last Resort process, which has been added to regressive standing charges on electricity bills, has increased affordability challenges for the most vulnerable customers, at the most difficult time. This is wrong. We welcome Ofgem’s recognition of the impact that regressive standing charges have on households and its review of how the Supplier of Last Resort levy is distributed. However, even if these costs are recouped on a usage basis, fuel poor, low income, and vulnerable customers with high energy demand, will still be hit hard.
Government response summary AI-generated
Ofgem is reviewing its approach to the Supplier of Last Resort levy in light of the Energy Price Guarantee and will update the Committee in due course.
Summary of the government's response below — read the verbatim text to verify.
Paragraph Reference:
76
Government Response
Acknowledged
HM Government · verbatim extract
Acknowledged
So far this year, the Supplier of Last Resort (SoLR) costs to be recovered from consumers exceeded £1bn, equating to a fixed charge of around £34 per household. These costs are recovered from consumers on a fixed basis, via the standing charge. In July, Ofgem launched a review of how the costs of supplier failure are recovered from electricity consumers – specifically to ascertain whether the existing fixed charge continues to be appropriate, or if a usage-based (volumetric) alternative would be a more suitable way to recover these costs. The review concluded that Ofgem should not change the current arrangements to a volumetric alternative in light of the evidence gathered. Overall, the review showed that recovering supplier failure costs through unit rates may lead to small reductions in bills for some low-income consumers, however, these savings are relatively small in the context of overall bills and would be at the cost of increasing charges for some high consuming customers many of whom are vulnerable. As a result, Ofgem has concluded not to change how SOLR costs are recovered and stakeholder feedback from a wide range of charities, consumer groups and industry representatives overall supported the status quo. The SOLR process is a matter for the independent regulator. BEIS maintains a regular dialogue with Ofgem to review lessons learned and understand where processes can be enhanced to improve outcomes.
Read the full response on Parliament ↗