Publications

This is CAS' response to the Economy, Energy and Fair Work Committee's call for view on local energy and electric vehicles, as part of their Energy Inquiry. CAS acknowledges the central role that locally-owned energy and electric vehicles have to play in the transition to low carbon, in line with climate change targets but we emphasise the need to protect consumers in the transition from unaffordably high fuel bills, scams and lack of redress, especially those who are vulnerable to these changes.

CAS welcomes the proposals for ECO3. The ECO scheme has helped deliver energy efficiency measures to vulnerable consumers in two other phases and we were pleased to see that BEIS and Ofgem are expanding consumer protections in this third iteration. In particular, we are pleased to see the incorporation of Trustmark into ECO3 to certify suppliers.  

In this response, Citizens Advice Scotland lays out our support of the broad aims of the principles within the policy statement, but urge that much more must be done to strengthen consumer protection and ensure that communities are involved in the process in an inclusive, sustainable way that meets their needs. 

Citizens Advice Scotland (CAS) believes it is more important to get the smart meter rollout right than it is for it to be rushed through to arbitrary deadlines, and we have long been concerned that the 2020 smart meter deadline was so unrealistic that it risked having a negative effect on consumers. In June 2016 we therefore published a report that called for the smart meter rollout to adopt an interim target of 80% smart meter coverage by the end of 2020, with 100% coverage achieved no later than the end of 2025. We reiterated this call in August 2018, and so we welcomed the UK Government’s September 2019 announcement that the smart meter rollout is to be extended to the end of 2024.

This new-found pragmatism provides an opportunity for a review of the targets, incentives and penalties to which energy suppliers will be exposed as the smart meter rollout progresses over the next 5 years. However, it must also be acknowledged that there remain multiple technical barriers to the universal rollout of smart meters, particularly in remote rural areas and for many Scottish households that use traditional electric storage heaters as the primary form of space heating.

These constraints lead CAS to be concerned that consumers reliant on electric heating in Scotland will be among the very last in GB to benefit from the smart meter rollout. Indeed, under current proposals we believe that it would be possible for electricity suppliers to comfortably exceed the proposed post-2020 smart meter targets without a single Scottish consumer with traditional electric heating having benefited from the rollout. This risks placing the costs of maintaining the traditional meter network onto a relatively small customer base, increasing prices for a group of consumers where a majority (52%) already struggle to afford to heat their homes to an acceptable standard.

CAS does not underestimate the significant challenges required to overcome these issues, but we are equally clear that the smart meter policy framework and the regulation of the retail energy market post-2020 must not unfairly burden consumers with additional costs they have no opportunity to avoid. We therefore believe that there may be a need to provide short-term protection for consumers whose ability to access the benefits of smart meters is restricted by the industry's readiness to provide them with suitable metering equipment. We also consider that suppliers could be better encouraged to deliver a market-wide smart meter rollout in all areas of GB if the proposed minimum coverage level were to apply separately in each electricity distribution network area.

While CAS supports proposals to move away from the “all reasonable steps” obligation that currently governs suppliers’ smart meter engagement programs, we are also cautious about the impact of holding suppliers to binding, linear annual targets given the technical barriers referred to above. The Citizens Advice network in Scotland already hears the concerns of consumers who have felt pressured into accepting a smart meter by their energy supplier, and even of instances where attempts to install smart meters have been made by domestic energy supply licence holders that are not the registered supplier at the property concerned. This suggests that while the imposition of installation targets backed by financial penalties for non-compliance may be driving the pace of the smart meter rollout, such targets may adversely impact consumers’ experience of smart meter installation and could jeopardise levels of engagement with the planned transition to a smarter energy future. We believe that suppliers may already be suitably incentivised to encourage their customers to embrace smart meters, and we therefore urge Ofgem to place its post-2020 focus on the enforcement of a high quality customer journey throughout the energy transition.

The Capacity Market arose from the UK Government’s Electricity Market Reform in 2014 and is designed to provide assurance that electricity supply can continue to meet demand where, for example, demand peaks coincide with periods of reduced renewable electricity generation.

After being selected on price through a reverse auction process, Capacity Market participants undertake to reduce stress on the electricity system, either by bringing additional generating plant online or by deploying technologies that reduce electricity demand.

To date, the Capacity Market auctions have favoured the provision of additional generating capacity, but this has often been reliant on relatively carbon-intensive forms of electricity generation which run counter to the Government’s ambitions on climate change. In July 2019, BEIS therefore consulted the energy industry and its stakeholders on how it might create new markets for energy efficiency in the electricity system such that it could become a viable alternative to the provision of additional generating capacity or electricity network reinforcement as a means of meeting peak demand.

In our response to this consultation, CAS observes that:

• The Capacity Market may yet prove not be an appropriate route by which to encourage investment in energy efficiency in the electricity market. However, the results of the Electricity Demand Reduction pilot do not definitively show that that energy efficiency is unable to compete in a Capacity Market, and more evidence is therefore needed before firm conclusions can be made.
• The design of Capacity Market should be revised to allow the whole system costs and benefits of a given intervention to be considered when assessing the value of competing bids. This would help to address the competitive disadvantage that electricity demand reduction technologies such as demand side response, flexibility services and energy efficiency face in the Capacity Market, where the carbon intensity of a given intervention is currently not considered.
• Reform of the Capacity Market should seek to take a whole system view of the whole life costs of a given intervention, where competing technologies such as energy efficiency and storage or flexibility services are also seen as complementary to one another.
• The Energy Efficient Scotland program and the development of Local Heat and Energy Efficiency Strategies presents a sizeable opportunity to leverage Capacity Market funding for energy efficiency as a form of electricity demand reduction.

CAS welcomes Ofgem’s proposals to improve outcomes for consumers who experience self-disconnection and self-rationing. We have identified a number of priorities:

• The standardisation of friendly credit dates and hours, where technically feasible
• Improvements to emergency credit provision, which maintains flexibility, but allows for the maintenance of supply in a reasonable worst case scenario
• The removal of barriers to discretionary credit, which maintains protection from excessive debt, but enhances consumer choice
• Improvements in how suppliers communicate with their prepayment customers, for e.g. as regards the seasonal accrual of standing charges
• The formalisation of Ofgem’s Ability to Pay principles in the licence code
• Utilisation of the full suite of smart functionality, for e.g. suppliers switching meters to credit mode to maintain supply
• Viable alternatives to prepayment, for e.g. clarification on the future of Third Party Deductions for energy (Fuel Direct)
• The extension of fuel voucher schemes (fuel credits)

CAS has responded to BEIS’ Hydro Benefit Replacement Scheme (HBRS) and Common Tariff Obligation (CTO) consultation. Both are subject to a statutory 3-year review and are designed, respectively, to subsidise the cost of electricity distribution in the North of Scotland to avoid disproportionately higher distribution network costs for consumers vs. those charged in the rest of GB; and to prevent domestic suppliers from offering less favourable terms to remote rural and island communities in the North of Scotland than they do to comparable consumers located elsewhere within the North of Scotland electricity distribution network operator region.

The HBRS imposes a levy on every electricity consumer in GB. For a typical dual fuel domestic consumer, this equates to about £1 per annum. To date, however, the additional costs of electricity distribution in the Shetland islands has been fully met by consumers in the North of Scotland. It is proposed that this will change and will instead be distributed throughout GB.