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Citizens Advice response to the Ofgem consultation about an additional debt-related costs allowance in the default tariff cap

Citizens Advice response to the Ofgem consultation about an additional debt-related costs allowance in the default tariff cap 219 KB

Whilst we agree that it is in the interest of customers to allow suppliers as a whole to recover efficiently incurred costs, this consultation does not provide sufficient evidence that the additional funding proposed for debt-related costs is justified. This is because proposals rely upon suppliers’ own estimates of bad debt without proposing any checks or controls on how these estimates are produced. A lower-quartile approach to benchmarking would provide some protection around this, however it is also suggested that this approach to benchmarking could be relaxed at the true-up stage. 

In order to ensure consumers have protections against suppliers being funded beyond the level of efficiently incurred costs, the following changes are required:

  • Review suppliers’ method of estimating bad debt. 

  • Confirm lower-quartile approach to assessing efficiency will be maintained throughout. 

  • Review any changes made to suppliers’ method of estimating bad debt at the true-up stage and make any necessary adjustments.