Citizens Advice response to Ofgem’s Reselling gas and electricity: Maximum Resale Price direction Call for Input

Maximum Resale Price Call for Input Citizens Advice Response 376 KB

Citizens Advice welcomes the opportunity to respond to Ofgem’s Call for Input on the Maximum Resale Price (MRP) direction. The MRP is an important protection for specific groups of domestic end-users, and we believe that there are several key changes Ofgem could make to ensure that the MRP delivers fair pricing and empowers consumers. We consider that Ofgem should introduce changes to the MRP to encourage resellers to get an appropriate deal for their consumers. Changes such as those suggested by Ofgem, such as a mechanism for enabling consumers to challenge excessive MRP charges, and a requirement for resellers to demonstrate their search for competitive rates, would have positive impacts on the ability of consumers to get a fair price for their energy. 

We also think Ofgem should expand the MRP to small and micro-businesses. Small businesses are at risk of poor outcomes due to the fact that they are not protected by the MRP. They are exposed to overcharging by resellers, resulting in financial difficulties for consumers, and resale energy arrangements may become unnecessarily complex and opaque. This would also engage these consumers in the net zero transition whilst offering protection from poor outcomes.

However, we believe that in the absence of an enforcement mechanism for re-sale arrangements, changes made to the MRP may be hard for consumers to enforce. Accordingly, we consider that re-sale arrangements should be avoided where possible, given their inherent reduction in consumer choice and protection (including access to affordability schemes such as the Warm Home Discount), and the lack of transparency and oversight engendered by re-sale arrangements. 

We are concerned about the use of prepay sub-meters by some resellers, which can have expensive metering charges and leave people disconnected with no access to support if they can’t afford to top up. Ofgem should consider whether it has powers to limit the use of prepay sub-metering through the resale direction given the significant risk this can pose to vulnerable consumers. 

Ofgem should also consider it would be possible to build on changes that enable metering beyond the boundary point for balancing markets as a route to providing consumers with sub-meters more control and choice about their energy supply. 

Some growth of re-sale arrangements in recent years has been driven by Permitted Development Rights conversations of commercial buildings to residential. Whilst outside the scope of this call for input, we would also like to flag that we believe the Government should look at rules related to metering under Permitted Development Rights, as well as introduce rules to limit the use of sub-metering arrangements where possible. 

In our response to the DESNZ Review of Ofgem we called for the Government to enable Ofgem to authorise energy services, including the resale of energy. Though it is positive that Ofgem are considering changes to encourage the dual use of MRP as a mechanism for consumer protection whilst enabling investment in net zero, its impact will be curtailed by the practical difficulty of ensuring resellers are following the rules. Without a route to redress and enforcement, consumers are exposed to poor outcomes, and there are few repercussions for resellers who break the rules. Ofgem could draw lessons from the recent regulation of Heat Networks in order to inform the future regulation of a diverse sector.