Response to Ofgem’s open letter – how costs of supplier failure are recovered

RECCo responded to Ofgem’s open letter ‘Review of how the costs of supplier failure are recovered’,  where we agreed that as the Standing Charge was intended to recover the fixed costs of providing infrastructure to consumers, it is not the ideal mechanism to recover the ad hoc costs arising from market failures.

We also noted that the flat charge to consumers which is recovered irrespective of their levels of consumption means that it has a regressive effect, with low consumption, and often low-income consumers paying a disproportionately high percentage of their energy bills towards those costs. We considered that in the absence of a genuine social tariff, or further support being offered through general taxation, a more fundamental review of standing charges could go some way to ensuring fairer charging arrangements for consumers.

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