Legal briefing | Environment & Regulatory |

COVID-19: Updates from OFGEM and OFWAT

Overview

Ofwat and Ofgem has published guidance (see Ofwat/ MOSL COVID-19 guidance update Ofgem's COVID-19 guidance webpage) to consumers and industry which gives insight into the approach the regulators are taking in response to COVID-19.

The expectation set out by both regulators is that the industry must take all necessary precautions to serve the needs of customers (including those who are vulnerable or those required to self-isolate). This will include taking a more flexible approach to customer payment plans and debt recovery (see below for more information).

Currently all regulatory requirements remain in place for all licensees which means industry will need to focus on taking steps to maintain business continuity, including if the licensee has a reduced workforce.

The UK government's recent decision to categorise the utilities industries as "critical sectors" during the COVID-19 emergency will help workers in essential roles by allowing them to send children to school despite the school closures, and this in turn will assist energy and water suppliers in continuing to operate. That said, providers will find themselves needing to juggle competing obligations relating to protecting the health and safety of its staff (see TS Health and Safety Guidance for Employers, Employees and Businesses), carrying out its supply obligations, and its additional responsibility to customers.

 

Ofgem Customer Support Measures

Ofgem and Ofwat will be working with the government to ensure the energy industry is taking all the necessary steps to serve the needs of customers, particularly people in vulnerable situations and people who may need to self-isolate at home. In its guidance to consumers Ofgem has stated that:

"Energy suppliers and network companies have plans in place to continue to provide energy. They are expected to closely monitor and follow government guidance and will take timely decisions on how best to protect customers and staff while delivering their services."

The UK government has launched an emergency package of measures with energy suppliers to ensure vulnerable people don’t face any additional hardships in heating or lighting homes during the coronavirus outbreak.

These measures include:

  • Ensuring prepayment and pay-as-you go customers remaining supplied with energy;
  • Supporting customers who are impacted financially as a direct or indirect result of COVID-19;
  • Industry agreement signed by all UK domestic suppliers and will come into force immediately.

In effect, this will mean energy suppliers will be required to assist customers struggling with money problems or repaying a debt by reviewing payment plans (including debt repayment plans), introducing payment breaks or reductions, extending time to pay and, in some cases, giving customers access to hardship funds.

 

Ofwat Customer and Trade Measures

Ofwat and MOSL (the market operator for the water retail market in England) announced on Friday (20 March 2020) that measures have been proposed in discussions between MOSL, Defra and Ofwat which include taking steps to:

  • Waive performance charges with effect from 1 March 2020.
  • Ensure all the performance charges collected during 2019/20 are available for re-distribution to trading parties (rather than used for market improvement projects).
  • Enable retailers to offset 2020/21 Market Operator (MO) charges against prior year performance charges (based on the specific amount that would otherwise be redistributed to them in September 2021) with effect from April 2020.
  • Improve settlement estimation to reflect reduced water consumption from April 2020.
  • Develop potential changes to provide relief on late payment of settlement charges to be progressed over the next two to three weeks.

Ofwat also stated in its announcement that it is considering potential urgent changes to the Customer Protection Code of Practice to require retailers to treat non-payment during these times as force majeure events and so do not qualify for disconnection (subject to suitable limits).

Following an extraordinary meeting held on 20 March 2020 with representatives from MOSL, Ofwat the Water Industry, Ofwat approved a three-month suspension of performance charges which was implemented at 6pm on 23 March 2020. The change proposal suspends Market Performance Standard (MPS) charges and Operational Performance Standard (OPS) charges for three months (March - May 2020). As a result, trading parties will not be unfairly penalised for failing to meet market performance standards due to factors outside of their direct control.

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