‘Ofgem is a busted flush’ campaign groups unite to take
Pre-action letter seen by The Herald on Sunday warns of judicial review to challenge the October price cap
A SCOTTISH housing group has begun legal action to try to block the energy regulator Ofgem from imposing “unlawful” and massive fuel bill hikes across the UK which it is feared will cost lives.
The Highlands and Islands Housing Associations Affordable Warmth Group has teamed up with the Good Law Project and Fuel Poverty Action to raise concern that the Ofgem is unlawfully failing to take measures to protect vulnerable customers from soaring energy bills.
They are planning a judicial review to attempt to stop the planned October bills price cap imposed by Ofgem – which is expected to rise from £1,971 to around £3,600.
The groups have sent a formal pre-action letter to Ofgem warning that it has a duty to protect at-risk groups from rising energy costs in advance of the planned increase.
The Herald on Sunday revealed that parts of northern Scotland will be hardest hit in the costof-living crisis with typical soaring energy bills of up to £7,500 a year predicted in January – £3,000 more than people in Glasgow where the average would be around £4,550.
In May, the Government announced an energy costs support package – worth £400 per household – in response to predictions that the energy bills cap set by Ofgem would peak at £2,800-a-year for the average household in October.
But analysts are predicting the bills cap for dual fuel will be around £800 more than that. This will raise the average UK household bill to a predicted bill of nearly £3,600 – marking a 180 per cent increase from last year.
Cap challenged
THE pre-action letter backed by Di Alexander, chairman of the Highlands & Islands Housing Associations Affordable Warmth Group, pictured above, and seen by The Herald on Sunday, warns they will seek a judicial review to challenge the October price cap.
It claims that Ofgem stands to fail in its legal duty to protect consumers, particularly those who are vulnerable and also communities that have no access to cheaper gas. The letter says that the imminent substantial increase to the energy price cap will be made without having conducted proper impact assessments including a consultation process as it is legally required to do by the Gas Act 1986, the Electricity Act 1989 and the Utilities Act 2000. “Ofgem has ... failed to comply with its duties to carry out and publish an impact assessment. A decision to substantially increase the energy price cap on August 26 in lieu of such an assessment will be unlawful on that basis,” the letter states. It warns that the Gas Act and Electricity Act charge Ofgem with a “principal objective” to “protect the interests of consumers”.
The groups say there are also obligations under the European Convention of Human Rights (ECHR) and a “broader public law duty to take steps to acquaint itself with all relevant material before making a decision”. And they claim that Ofgem is failing to have sufficient regard, or provide measures, to protect vulnerable groups. They say the Gas Act and Electricity Act “require Ofgem to protect the interests of consumers, having regard to the interests of individuals who are disabled or chronically sick, individuals of pensionable age, individuals with low incomes and individuals residing in rural areas”. The letter states that it cannot be in the interests of consumers to be unable to pay for the energy they require, whether temporarily or over the long term, if it means they “face discomfort, inconvenience and risks to health and even life”.
‘Give up food’
AN increase in the price cap would lead to “significant rises” for those who would spend a “disproportionate fraction” of their income on energy “impairing” living standards and those who would have to give up essentials such as food to get by.
It said that to abide by the law, Ofgem has to “direct its mind, evaluate and give rigorous consideration to such impacts”.
Meanwhile, it is estimated one in five UK households cannot access mains gas. The Highlands & Islands Housing Associations Affordable Warmth Group says this rises to two in three in some parts of the north of Scotland.
The pre-action letter has been sent as “serious concerns” have been raised about the way in which Ofgem is carrying out the prices review, based on previous correspondence with the groups.
They have raised concerns that Ofgem is relying on impact assessments carried out four years ago before the Covid pandemic, let alone the current cost-ofliving crisis.
When asked by the groups what impact assessments it made on the likely impact of any bills rise in October on vulnerable consumers, Ofgem wrote back at the end of July: “Thank you very much for your letter. We have the interests of consumers, particularly vulnerable consumers, at the heart of everything we do. We will provide further details of the reasons for our upcoming price cap decisions when we publish them next week.”
Mr Alexander, former chairman of the Scottish Government’s rural fuel poverty task force, who lives in a 10-year-old home near Dornoch, says that his own electricity bills have more than doubled since last year.
‘Wake-up call’
HE said the cap system discriminates against those who do not have gas and have to pay more for their energy, and fails to protect the most vulnerable.“We are trying to stop Ofgem in their tracks and giving them a massive wake-up call,” he said. “It is saying to Ofgem – if you really are saying you are protecting customers, then you simply have to stop these price rises going ahead, otherwise they are failing in their moral responsibility.
“Looking at the Ofgem duties and they say it is about protecting vulnerable consumers, but they aren’t doing that, so what is the point of them. They are protecting the interests of suppliers first of all. They are a busted flush.
“For me, Ofgem is nothing more than a fig leaf for failed government policy.”
The pre-action warns: “It is unlawful for a public authority to act in a way that is incompatible with the ECHR.
“Given the potential impact that Ofgem’s decision will have on the human rights of vulnerable households across the
They are protecting the interests of suppliers first of all. They are a busted flush. For me, Ofgem is nothing more than a fig leaf for failed government policy
UK, Article 8 of ECHR is engaged. Should Ofgem fail to take reasonable steps to safeguard the rights of individuals, it could be at risk of violating Articles 8 and 14 of the ECHR on the basis that such a significant increase to the energy price cap is likely to render some individuals destitute, rendering them homeless and/or forcing them to have to choose between heating their accommodation and feeding their family or other essential household expenditure.”
The groups say there should be a discounted social tariff for vulnerable groups to ease the price hikes for those in need and a failure to give a reasoned consideration over that prior to raising the energy bills cap next week “would likely be unlawful”.
They warn that since the Domestic Gas and Electricity (Tariff Cap) Act 2018 (DGEA) came into force, the cap has “effectively become the default” for prices with competition in the marketplace “almost entirely absent”.
Excessive profits
THEY say it is stated on Ofgem’s website that the cap “stops energy companies from making excessive profits, ensuring customers pay no more than a fair price for their energy”.
But they said there had been nothing in Ofgem’s announcements that suggested it had considered the “particularly severe impact” that will be felt by households that do not have a gas supply.
Ofgem data shows the present price cap put the cost of gas at 7p a unit while electricity costs four times that at 28p.
Concerns were also raised earlier this month when Ofgem said it would double the time in a year when it would review energy prices for consumers from twice to four times – there was to be a reduced notice period of 35 days, between any change being announced and it coming into effect.
It emerged that Christine Farnish, a director at Ofgem, resigned earlier this month, accusing the regulator of favouring businesses over consumers with a rule change that will add as much as £400 to the average UK household energy bill.
Ms Farnish said the regulator “gave too much benefit to companies at the expense of consumers”, according to a leaked internal Ofgem announcement
Ofgem has been under pressure after being blamed by some critics for not preventing the collapse of 29 energy suppliers since mid-2021.
It is understood Ms Farnish objected to a change to the methodology used to calculate the price cap.
Discrimination
MR Alexander, who said he expects the case to go to court, said her resignation was “indicative of the predicament Ofgem finds itself in at the moment”. He said his group got in touch with the Good Law Project because he felt those who cannot get mains gas and poorer households are facing “manifest discrimination”.
“Every year, Ofgem, the chairman and the board come to Glasgow and invite people to get in touch with them, people like me, to have chat.
“And I asked why should someone living in Portree who cannot get mains gas not be able to pay the same as someone living in Portsmouth or Pimlico who can get mains gas. I spoke to four board members, including the chair. And they didn’t have an answer – they looked uncomfortable.
“I asked one member if they talk about the issue, and they said they do but it tends to be in the coffee break. I thought, dear God, talk about having lost the plot completely. It begs the question of what regulatory bodies are actually doing and capable of achieving. Part of their duty is to protect vulnerable households and they are simply not doing that.
“This is manifest discrimination, and they have to be challenged under human rights legislation and other legislation. The Government is responsible for Ofgem. If it isn’t working then they need to do something about it and do something quick.”
An Ofgem spokesman said that it had received the letter and would reply in due course.
It added: “Ofgem’s priority is to protect consumers and we know that people are currently under huge pressure as bills continue to rise.
“We will keep working closely with the Government, consumer groups and with energy companies on what further support can be provided to help with these higher prices.”