UK energy regulator Ofgem has been threatened with legal action should it fail to protect vulnerable customers from skyrocketing fuel bills.
A Scottish fuel poverty campaigner is at the forefront of the move, which has been taken alongside Good Law Project (GLP) and Fuel Poverty Action.
Dion Alexander, the chair of the Highlands & Islands Housing Associations Affordable Warmth Group, has teamed up with the two other campaign groups to send Ofgem a letter warning of the possibility of legal action following any future announcements on the energy price cap.
In April, the cap on energy prices imposed by Ofgem was raised by 54% to £1971. An announcement is expected on August 26 which will see the price cap raised again from October.
Ofgem has predicted this new cap could be around £2800, while consultancy firm Cornwall Insight say it could be as high as £3580.
Auxilione, another energy consultancy, has predicted that the cap could rise to as much as £5000 in April 2023, by which point Ofgem has said it will be issuing quarterly revisions to the cap – rather than every six months.
In their 20-page pre-action letter to the energy regulator, the campaigners say that Ofgem will have failed in its legal duty to make protecting consumers its “principal objective” if it allows such steep rises to go ahead.
The letter alleges: “Ofgem has misdirected itself and failed to carry out an impact assessment (including a related consultation process) before deciding to increase the energy price cap, as it was required to do by: s.4AA(3)(a)-(d) of the Gas Act 1986 and s.3A(3)(a)-(d) of the Electricity Act 1989; s.5A of the Utilities Act 2000; its procedural obligations under Articles 8 and/or 14 of the European Convention on Human Rights (‘ECHR’); and/or its broader public law duty to take steps to acquaint itself with all relevant material before making a decision.”
It further claims that the energy regulator had failed to comply with the Public Sector Equality Duty (PSED) “by not conducting an equality impact assessment in relation to the likely impact of the proposed increase in the context of the current crisis, despite the fact that any increase is likely to disproportionately affect individuals with certain protected characteristics”.
The campaign groups say that legal action will be taken swiftly if a large rise in fuel bills is announced on August 26 without the concerns having been addressed.
Particular worries are raised about people who live in "off-gas" areas – such as Shetland – whose energy costs are much higher.
Jo Maugham (below), the director of Good Law Project, said: “Ofgem has the power to protect vulnerable people from the devastating increases in energy costs and we think they should use them.
“Having failed to properly assess the risks, they don't seem to be planning any steps to protect vulnerable groups. We hope we're wrong and that Ofgem is doing all this behind the scenes. But we don't want to wait for their 26 August announcement to find out.
“We've put them on notice that if they don't properly comply with their legal duties before announcing the next increase, we'll be ready to challenge it straight away.”
Ofgem says it is protecting millions of households by capping the level of profits an energy supplier can make to 1.9%. Announcing changes to its price cap methodology earlier this month, it added that: “It is not in anyone’s interests for more suppliers to fail and exit the market.”
It went on: “Ultimately energy has to be paid for in full and the price cap has to reflect the costs to the supplier of buying it wholesale and supplying it to homes.”
In late July, energy giants Centrica and Shell both announced billions of pounds of profits in a recording-breaking time for their businesses.
First Minister Nicola Sturgeon has called for the anticipated price cap rise to be stopped, while Labour leader Keir Starmer has laid out a £29 billion plan to address the “national emergency” and freeze the cap at its current level for six months.
An Ofgem spokesperson said: "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.
"We can confirm that Ofgem has received a letter from the Good Law Project and we will reply in due course."
