Recommendation 18

HM Government · verbatim extract Deferred

6 Responses to the Committee’s Third Report of Session 2022–23 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.