Dear Mr Pye,
Thank you for your letter of 21st March, about the challenges facing Park Home residents in terms of their energy contracts.
The Secretary of State is grateful to you for having taken the time to write. I have been asked to respond on his behalf.
We recognise the difficult position that many households are in with the continued impact of Covid-19 and rising energy prices. How much consumers pay for their energy, as well as fairness and affordability are at the heart of the government’s commitment to driving bill savings and ensuring costs are distributed fairly.
The energy price cap was introduced through legislation to address an issue where certain groups of customers in the domestic market were found to be paying too much for their energy through a loyalty penalty. It was not designed to mitigate high global wholesale prices which is what we are currently seeing.
Park home owners purchase gas or electricity in the non-domestic market, which has a greater diversity of supply arrangements for businesses compared to the domestic sector. We are not aware that commercial contracts purchased by businesses, like mobile park owners suffer a loyalty penalty like domestic default tariffs do, and this is why the price cap legislation doesn’t cover them.
Ofgem sets the Quality of Service Guaranteed Standards that must be met by each electricity network company, which includes an entitlement to compensation if distribution companies fail to meet the service standards required.
If residents are connected to a private network that is owned and operated by the residential park owner or operator, instead of being connected directly to the local Distribution Network Operator network, the Distribution Network Operator only has one customer directly connected to their network – the private network owned by residential park owner. Under the Guaranteed Standards of Performance, Distribution Network Operators are only required to make payments for supply interruptions to customers that are directly connected to their network. Private network operators are not required to make payments to their customers under this scheme.
The current compensation rules were set in April 2015 for the duration of the current price control period, which runs from 1 April 2015 to 31 March 2023, and cannot be changed. I understand that Ofgem is in the process of considering the arrangements for the next price control period, which starts on 1 April 2023, and as part of this they will review the eligibility criteria for compensation claims due to power disruptions.
The Energy Ombudsman has been approved by Ofgem to independently handle and resolve disputes between customers and energy companies. If residents feel that their energy company has not appropriately handled and resolved their complaint, they can refer this to the Energy Ombudsman. Further details and points of contact can be found at the following link. www.ombudsman-services.org/sectors/energy.
The Government recognises this is a worrying time for consumers facing pressures due to the significant increases in global gas prices. Our priority is to ensure costs are managed and supplies of energy are maintained. The Secretary of State is in regular contact with the energy industry and Ofgem to manage the impact of high global gas prices and will continue to monitor the situation incredibly closely, including the impacts for consumers supplied by commercial energy contracts.
Yours sincerely,
Helen Huish
BEIS CORRESPONDENCE UNIT