Consumer Scotland published its response to Ofgem's Future Price Protection Discussion Paper: Call for input on 13 May 2024. The statutory body for consumers in Scotland set out its position on how the energy price cap, introduced in 2019, should be redesigned for a changing retail market1.
The response notes that the price cap was "initially designed as a safeguard against the loyalty penalty" before acting as "a vital price protection mechanism during the period of unprecedented price rises in the wholesale market"1. Ofgem describes its existing price protection arrangements as having three key parameters, which it calls flat, universal and stringent, and proposes relaxing any one of the three in the design of future price protection1. Consumer Scotland said it welcomed the discussion and recommended that any analysis of policy options give a central focus to positive consumer outcomes1.
The response applies the Consumer Principles, a framework used by UK and international consumer organisations, to the future retail market. Consumer Scotland set out how each principle should translate into the future market1:
| Consumer Principle | Future retail market context |
|---|---|
| Access | Consumers feel enabled to access the benefits of future retail market offerings, and are protected where they cannot or choose not to |
| Choice | Consumers have sufficient choice (e.g. when choosing tariffs, technology, etc.) that works for them and their circumstances |
| Safety | Consumer protections that keep pace with market developments and maintain essential safeguards |
| Information | Consumers are empowered to make informed decisions related to new market arrangements |
| Fairness | Consumers are part of an inclusive energy market designed to meet the varying needs of consumers, including sufficient price protection |
| Representation | Consumers can be active participants in how goods and services are designed and delivered, including through advocacy and advice |
| Redress | Consumers have routes to redress in the future market when things go wrong, underpinned by reformed standards of practice |
Consumer Scotland recommended that Ofgem review policy options against the Consumer Principles and set out a clear articulation of intended consumer outcomes, including a distributional analysis of the socio-economic impact of any reforms tested against a range of consumer archetypes1.
"Since its introduction in 2019, the energy price cap has played an important role in protecting consumers."
Why it matters for households
The price cap sets the maximum a supplier can charge domestic customers on a default tariff, so any change to its design affects what households pay when they do not switch. Ofgem's discussion paper covers the structure of billing, making standard default tariffs more flexible, understanding the needs of those who are struggling or vulnerable, and protecting those who are not actively engaged in the market1. Consumer Scotland's response argues that safeguards for consumer interests must be integral to any reforms, including in the design of future price protection1. For a household, the practical question is whether a redesigned cap continues to limit what a disengaged customer pays, or whether protection is relaxed in one of the three parameters in exchange for other benefits. The response does not set out which parameter should be relaxed, and no decision has been reported.
What happens next
No timetable for Ofgem's next steps on future price protection is given in the response. Consumer Scotland's publication is dated 13 May 20241.