Ofgem has accepted the recommendations of its review of Severe Weather Compensation Arrangements for Electricity Customers, setting out proposed amendments to the Electricity (Standards of Performance) Regulations 2015. The decision to accept the report's recommendations and proposals on the amendments to the 2015 Regulations was published in November 2022 as an open letter1. The statutory consultation on the draft amendments was published on 4 April 2023, with responses due by 2 May 20231.
The review followed Storm Arwen, which in late November 2021 caused the worst damage and disruption to the electricity system in over 15 years, with more than 4,000 customers off supply for between one and two weeks1. Ofgem published its Storm Arwen Report in June 20221. The proposed changes cover recommendations 1, 2, 3, 5 and part of 6 from the review; Ofgem says it will work with stakeholders on the practicalities of the remaining recommendations1.
The main proposed changes are set out below.
| Change | Current arrangement | Proposed |
|---|---|---|
| Storm categories | Three categories (1, 2 and 3) | Category 3 removed; thresholds for Categories 1 and 2 updated |
| Initial payment | £70 | £90 |
| Additional payments | £70 every 12 hours | £45 every 6 hours |
| Maximum compensation per loss of supply | £700 | £2,250 |
| Payment methods | Cash, cheque or credit to the customer's account | Bank transfer added as an interim measure |
The cap change is equivalent to an increase from 5.5 days off supply for a Category 1 storm and 6.5 days for a Category 2 storm to 13 and 14 days respectively1. Ofgem also proposes an inflation adjustment mechanism, updating payments in line with the CPIH index published by the Office for National Statistics up to January 2023 and rounding to the nearest £51. Payments have not been updated since 20151. The updated thresholds for Categories 1 and 2 are based on the 10-year historical performance from 2012/13 to 2021/22 of the mean daily faults at distribution higher voltage of distribution network operators1. For an event to be considered severe weather, it must be more than 8 times the daily average number of faults in a 24-hour period1.
"This will increase the maximum compensation, per loss of power supply, from £700 to £2250."
Why it matters for households
The guaranteed standards of performance set the compensation a distribution network operator must pay when it fails to restore supply within prescribed timeframes after severe weather. For a household, the proposed changes affect both how quickly payments start to build and how much can be claimed for a long outage. Halving the interval between additional payments from 12 hours to 6 hours means compensation steps up more often, although each individual payment is smaller at £45 rather than £701. The higher cap of £2,250 extends the period over which payments continue before they stop1. The inflation mechanism is intended to stop payment levels eroding in value over time, and the addition of bank transfer is intended to speed up how quickly money reaches customers1. Ofgem states that enabling other payment methods beyond bank transfer requires further work to protect customers from unintended consequences1.
What happens next
The consultation closed on 2 May 20231. Ofgem's intention is that the proposed change will come into effect in July 20231. The prescribed sums for each financial year beginning with 1 April 2024 are to be calculated under the new mechanism1.
Sources1 cited
- Statutory consultation on amendments to the Electricity (Standards of Performance) Regulations 2015 for Severe Weather compensation arrangements%20Regulations%2020151680596597411.pdf), ofgem.gov.uk