The Retail Energy Code Company (RECCo) submitted a response to Ofgem's consultation on an additional allowance for debt-related costs within the default tariff cap, it said on 2 November. The consultation concerns the energy price cap, the default tariff cap that limits what suppliers can charge households on standard variable tariffs.
RECCo said the proposed changes would increase costs for customers who are able to pay their energy bills, including those who have paid off any outstanding debts.
"We believe that the proposed changes will inevitably lead to increased costs for those customers who are able to pay their energy bills, including those who have paid off any outstanding debts."
The body added that not all suppliers would necessarily pass the additional costs on, and that some may offer tariffs below the allowance. It said it was therefore crucial that the retail market operates efficiently and lets consumers switch to better tariffs easily and quickly.
"However, we acknowledge that not all energy suppliers will pass on the additional costs and some may offer tariffs below the allowance."
RECCo's stated role is to maintain the retail energy code, the rules that govern switching and other market processes. Its response argues that the effect of the allowance depends on how suppliers behave and on how readily households can move to a different tariff.
The size of the allowance, the date it would take effect and the number of households expected to be affected have not been reported in the material available. Ofgem's own decision on the consultation has not been reported either.
Why it matters for households
The default tariff cap sets the maximum a supplier can charge for each unit of gas and electricity, and for standing charges, on a standard variable tariff. An allowance for debt-related costs is money built into that cap to cover what suppliers lose when customers do not pay. Where such costs are recovered through the cap, they are spread across the customers who remain on it.
For a household that clears its bill each month, the practical effect is that part of what it pays covers debts run up elsewhere on the supplier's books. That sits alongside the other policy costs and levies on energy bills that make up the final figure. RECCo's point is that the burden falls on those who can pay, including those who have already settled arrears.
The counterweight it names is switching. A household able to move to a tariff priced below the allowance would not carry that element of the cost, which is why RECCo stresses how quickly and easily consumers can change supplier. Working out what any given tariff costs to run, and comparing a two-rate meter with a single-rate one, is covered in appliance running costs and in Economy 7 versus single-rate tariff costs.
For energy independence at home, the allowance matters because it is a cost a household cannot control through its own consumption. Using less does not reduce the debt element built into the cap. What a household can influence is which tariff it sits on, and whether it is on the capped default at all.
What happens next
No next steps have been reported. Ofgem's decision on the additional debt-related cost allowance, and any date for it taking effect, are not in the material available. RECCo's full consultation response is published on its site.