Strategic Compliance with Ofgem’s Vulnerability Directives

Ofgem’s latest figures show energy debt levels have reached a new high of £3.3 billion, up from £3.1 billion in December 2023. With financial pressure continuing to mount on households, protecting vulnerable customers has never been more important within the energy sector. As Ofgem’s focus on this intensifies, it’s essential to explore how to navigate compliance whilst maximising support for vulnerable consumers. This is achievable through innovative solutions, internal improvements and proactive customer service.

Ofgem have highlighted their focus on vulnerable customers in the 2017 Standards of Conduct change, which introduced the ‘vulnerability principle’ and the Consumer Vulnerability Strategy 2025. The Energy UK Vulnerability Commitment supports these initiatives. It has over a dozen companies in 2024 pledging to improve their handling of vulnerable customers.

Energy companies must use these to ensure they are looking after customers and remaining compliant.

The Legislation: Standards of Conduct

Since 2017 there’s been clear regulation stating that over and above suppliers’ obligation to fair customer treatment, more must be done for vulnerable customers. Now, there must be an explicit, additional effort to identify and respond to those in vulnerable situations. Labelled the vulnerability principle, it’s fairly broad. Whilst adding to an already complex regulatory framework, it has important implications.

Companies must ensure that:

• Any actions taken by the supplier must not result in harm to the customer (unless the detriment is relevant in all circumstances).
• Domestic customers in a vulnerable situation are identified in an effective and appropriate manner.
• Those in a vulnerable situation must be responded to in a manner such that they are treated fairly.

It’s clearly not the easiest regulation to interpret. Whilst adherence to Ofgem’s Standard Licence Conditions is crucial, it lacks detail on the treatment and support for vulnerable customers. In response, to accompany the legislation, in 2019 Ofgem launched their Consumer Vulnerability Strategy. 

The plan: 2025 Consumer Vulnerability Strategy

The Consumer Vulnerability Strategy lays out Ofgem’s plan to ‘make a positive difference for all customers’ by 2025. In 2025, Ofgem plans to relaunch this strategy to re-focus on these aims. By acting now, companies have a chance to get ahead of the curve.

The first of the 5 main objectives is ‘Improving identification of vulnerability and smart use of data’. Within this area, the report poses 3 key problems:

1. Consumers in vulnerable situations are not identified effectively 

Ofgem encourages the use of data to identify potential vulnerability in line with data protection legislation (3.12). To achieve this, companies should regularly maintain and proactively update the data they hold on their customers including their Priority Services Register data (Outcome 1A). 

2. Consumers are not self-identifying as needing additional support

Ofgem expects to see evidence that there has been an improvement in support for consumers to self-identify (Outcome 1B). As well, they require companies to ‘act swiftly to provide support to the people who need it’. 

3. Smart data is not being utilised sufficiently

They want to see ‘better use of data across regulated sectors to enable more holistic and targeted support for consumers in vulnerable situations.’ (Outcome 1C).

This strategy also focuses on: 

• Supporting those struggling with their bills. 
• Driving significant improvements in customer service for vulnerable groups.
• Encouraging positive and inclusive innovation. 
• Working with partners to tackle issues that cut across multiple sectors. 

The Vision: Energy UK Vulnerability Commitment

This voluntary commitment lays out a collaborative, proactive and transparent approach to improve support for vulnerable households. It was developed by Energy UK, Ofgem and with consultation with energy customers themselves, and has been signed by British Gas, EDF, E.ON Next and Octopus Energy amongst others. It establishes a clear plan to comply and exceed minimum legislation and improve outcomes for vulnerable customers.

The plan includes ‘designing relevant customer communications and processes in a manner that supports customers to feel comfortable in disclosing vulnerabilities.’ Also, these companies pledge to put these customers on an appropriate, alternative process to ‘improve outcomes for all customers in vulnerable circumstances.’ Overall, this plan clearly demonstrates the aforementioned objectives of Ofgem’s Strategy, as well as the legislated vulnerability principle.

The latest 2023 update includes several examples of good practice by participating companies and ends by re-confirming Energy UK’s expectations that participating companies must continue to go above and beyond the Standard Licence Conditions set out by Ofgem in their support of vulnerable customers.

The Change: How To Innovate

There’s many internal improvements suggested within these various strategies and commitments, but there is a common theme: current efforts fall short, companies need to innovate. 

The self-identification problem is difficult to overcome in-house: customers are 5x more likely to disclose issues digitally and to third parties. This requires innovative solutions such as TellJO’s digital wellbeing check: an easy, GDPR compliant solution to the first step of support for vulnerable consumers – identification. And once you’ve identified your customer’s needs, a whole world of customer support and compliance possibilities open up. 

Want to know more? Let’s chat: https://telljo.org/work-with-us/contact/

https://www.ofgem.gov.uk/decision/consumer-vulnerability-strategy-2025

https://www.ofgem.gov.uk/sites/default/files/docs/2017/08/final_decision_-_standards_of_conduct_for_suppliers_in_the_retail_energy_market.pdf