We know one of the buzzwords in Brussels is IMPLEMENTATION. We are calling for it. When it comes to implementing the electricity market reform, however, Member States should be extra careful on how they transpose certain provisions into national law to avoid hampering the market’s liquidity and competitiveness. This is especially true for the provisions on bans on disconnections whose implementation is due by 17 January 2025.
To aid in that endeavour, Eurelectric has developed guidance for Member States with its new paper on “Protecting vulnerable and energy-poor customers from disconnections“.
Article 28a of the EMD reform states that Member States shall ensure that vulnerable and energy-poor customers are fully protected from electricity disconnections by either prohibiting suppliers to disconnect their customers or by using equivalent actions.
While Eurelectric fully agrees with the need to provide dedicated support and solutions to vulnerable and energy poor households, a ban on disconnections is not a good idea nor for suppliers nor for consumers.
- Disconnections is a measures of last resort and suppliers inherently have no interest in disconnecting their customers.
- A ban on disconnection would create a moral hazard where customers are disincentivised to engage with suppliers to settle invoices and aggravate consumers situation through debt-stacking. In addition, if suppliers are prohibited to disconnect customers who do not or cannot pay their bills as a last resort measure, suppliers might consequently avoid offering services in areas where they expect the likelihood of non payment and defaulting customers to be higher. This might even lead suppliers to offer higher prices for those areas to compensate for the extra risk, which would in turn increase the probability of customers getting into financial difficulties.
- There are a myriad other supporting measures and safeguards to support consumers in settling their bills and finding solutions for their situation, effectively preventing disconnections.
For these reasons, we propose instead the following equivalent measures to disconnection bans:
- develop national consumer-supplier engagement codes to increase mutual engagement so solutions can be offered for customers;
- review and potentially extend the set of national supporting measures and safeguards, i.e. energy efficiency measures;
- consider the option of reduction of power supply to a vital minimum to nudge non-engaging customers – if technically feasible and the climatic conditions in Member States allow it;
- tackle energy-poverty first and foremost through social policies; and
- for Member States applying a definition for energy poverty and vulnerability: apply reasonable criteria for a justified scope.
For more information, take a look at our full paper or reach out to us!