Dom Taylor, External Affairs Intern, Money and Mental Health Policy Institute
Ofgem is changing the energy price cap every 3 months - here's what it means for people with mental health problems
1 June 2022
As a quick glance at the news will show you, the energy crisis is deepening and requires urgent action. Last week, the government’s announcement of much-needed measures to support people through the difficult times ahead has dominated the headlines. But another important development came earlier in May: Ofgem’s decision to change the energy price cap every three months, instead of the current six.
Ofgem (which regulates the energy sector) hopes that these changes will help to steady the energy market. It will allow energy providers to charge us more (or less, should the price cap be lowered) for a unit of energy on a more regular basis. More controversially, the “Market Stabilisation Charge” — requiring energy firms that are taking on new customers to pay a fee to the old provider — has been introduced as a temporary measure.
But what do these measures mean for consumers with mental health problems, and are they enough given the scale of the crisis?
Why are Ofgem proposing these changes?
Ofgem argues that these measures are an effort in market stabilisation. Through the Market Stabilisation Charge, Ofgem hopes to discourage providers from undercutting other firms with better rates and poaching customers, should wholesale energy prices go down. Given the tidal wave of energy firms going bust within the last year, their concerns are well-reasoned.
With dwindling suppliers comes less competition and, eventually, fewer incentives for providing customers with enticing offers and discounts. In the worst case, it leaves customers trapped with one provider, unable to shop around for a more affordable deal that suits them best. We know that for customers with mental health problems, shopping around for a good deal can be especially difficult, and so this group is disproportionately affected by these challenges. Taking measures to stabilise the market is one way that could help ensure people with mental health problems get a fairer deal when it comes to their energy account.
Ofgem’s new quarterly review of the price cap could prove beneficial to the consumer in that, should energy prices lower, this difference will be felt sooner. Taken together, these changes could provide a long-term solution to the crisis. However, there’s every chance that these measures could leave consumers worse off.
In the consumer’s best interest?
Naturally, just as consumers will feel the benefits of a fall in prices quicker under a quarterly change, they will just as easily feel the drawbacks of a rise in price. We only need to look at the latest forecast of a dramatic increase this October to get a sense of which of the two is more likely. Worse still, a quarterly change would see the energy price cap moved in January – one of the coldest months, and at a time where many households will have higher outgoings from the festive season. Not only this, but plans to reduce the notice period of a change in prices to only 25 days gives households even less time to prepare their budgets accordingly.
Again, these are challenges that will particularly affect customers with mental health problems. Often when we are struggling with our mental health, it is extremely difficult to manage money, and to plan and budget for bills. It can also be much more difficult to deal with energy firms and to carry out the admin needed to stay on top of your account. With energy bills set to change more regularly, this could make it much harder for many of us with mental health problems to plan for bills and manage ingoings and outgoings.
What Ofgem should do
Countless households already feeling the pinch can’t afford to keep up with current rates, much less be hit by a further increase towards the end of this year. The likely effects of this on individuals’ mental health can’t be understated.
“We can barely afford the cost now let alone when it rises even more and we both work…I feel very anxious and low because of the pressure to find the money.” Expert by experience
Beyond the potential merits and drawbacks of changing the price cap more regularly, there are other steps that Ofgem can take to ensure people with mental problems get better support in dealing with rising energy costs.
As a regulator, Ofgem is responsible for making sure that energy providers live up to their duties to treat vulnerable customers fairly. This would mean emphasising clear guidelines that identify what good and bad practice looks like, monitoring whether providers’ are acting in-line with them, and issuing penalties to companies that aren’t. If Ofgem finds that it doesn’t have the capacity to do this, either through a lack of budget or power constraints, then it has to push the government to enable it to do so.
What you can do
When big macroeconomic factors out of our control collide and leave many of us worse off, it’s easy to feel powerless. Thankfully, there are a couple of things you can do to influence Ofgem’s response. If you’d like to have your say on Ofgem’s proposals, you can contribute to their consultation before the 14th June here – be sure to note whether you want your contribution to be confidential.
As well as this, if you have lived experience of a mental health problem and want to share how the energy crisis is affecting you, join our Research Community and provide your insight.