2. Ofgem Consultation on Energy Debt Relief and Consumer Protection

In our responses to Ofgem’s consultations on energy debt relief and the future of price protection, we have noted the tactical nature of the suggested measures to fix the problems of spiralling energy debt and inadequate consumer price protection. Focussing on discrete problems alone in the energy supply system will not deliver sustainable warmth for homes. These problems can only be resolved through a fairer approach to energy pricing for those on low incomes, means tested benefits, and/or, whose typical energy usage is high for reasons of health, geography, heating source, or house condition, as set out in point one above. We conclude that a strategic, holistic, and long-term approach to consumer protection is needed in the shape of a flexible energy discount mechanism.

Specific points we made in these consultation responses, included:

Ofgem’s consultations on energy debt relief

Scottish households are facing unprecedented levels of energy debt, with clients seeking advice from the Citizens Advice network in Scotland in 2023/2024, presenting with an average energy debt of £2,500. This figure rose to £3,130 in accessible/remote rural areas[3].
Demographic analysis shows that energy indebtedness is highest for vulnerable groups – those with a disability that limits them a lot, households with incomes below £20,000, and those with a child under the age of 5.[4]
Rising debt levels and high energy bills make it clear that current measures to support vulnerable consumers and low-income families are not working.
A targeted, flexible and dynamic discount mechanism would prevent the build-up of energy debt.
Debt relief for those currently in energy debt should support them without materially increasing prices for all customers, which would run the risk of pushing more people into debt.
The provision of advice is also necessary to mitigate the risk of future debt.

Future of price protection

The link between electricity and gas prices fails communities off gas-grid, predominantly rural ones, because the typical domestic consumption values used in calculating the price cap are unrepresentative for those using electric heating as their main heat source.
The increased drive towards decarbonisation, at a time when electricity prices are so high, raises questions about the affordability of decarbonisation especially for those in fuel poverty.
It is clear from the fuel poverty rates and the level of energy consumer debt that the existing energy market arrangements and price protection are not working for almost a third of Scotland’s population.
Warm Home Discount (WHD) is the most far-reaching mechanism for the support of vulnerable households. It currently has limitations in its structuring, funding, and delivery. (Although, as noted above the UK Government’s consultation on expanding the WHD scheme 2025/26, to which we have also responded, offers an opportunity to reform WHD). Issues with the existing WHD model are that: it has not kept pace with the high cost of energy so its value is insufficient, it is not tapered in a way that is equitable for those who have to pay more to heat their homes, and its funding, through electricity bill levy, is regressive.
Our view is that in the short term, prior to the introduction of a targeted, flexible, and dynamic discount mechanism, winter fuel payments – Winter Heat Payment, Pension Age Winter Heating Payment and WHD – should be consolidated. As this cuts across both UK and Scottish Government competence, collaborative working would be required. The eligibility criteria should also be rationalised, so that where this is not already the case, the funds should be targeted at vulnerable and low-income consumers.