Authority guidance on the allocation of redress funds

Guidance

We have appointed the Energy Saving Trust (EST) as the independent Service Provider to manage and allocate voluntary redress funds.

Companies may volunteer to pay a sum of money to appropriate charities, trusts or organisations in lieu of, or in addition to a financial penalty for breaches of licence conditions. Companies may also volunteer these payments to remedy any harm to consumers, in addition to compensation to those directly affected, where Ofgem has not conducted a formal investigation.

This appointment follows our decision to engage an expert third party organisation, following a consultation on the proposal in summer 2016. EST will follow the Guidance document below when carrying out this service, and we may update this Guidance from time to time at the Authority’s discretion.

Our decision to engage an expert third party, and the associated Guidance below, are to ensure the voluntary redress funding is well targeted, and is allocated in the best way to maximise the long-term positive impact of voluntary redress payments for energy consumers across Great Britain, and in particular those in vulnerable circumstances.

The contract ran for an initial 2-year period, and was extended for a further two years in February 2020.

In January 2018 we decided to lower the amount of voluntary redress funding required for EST to begin allocating funds from £500,000 to £250,000. That amount was achieved in February 2018 and EST awarded funding for the first round of applications from July 2018.

In November 2020, the Authority made the decision to update the Guidance document below to allow funding for projects that target decarbonisation. This amendment is in line with Ofgem’s Decarbonisation Action Plan 2020. The updated Guidance allows up to 15% of the overall funds to be allocated to the development of products and services that tackle decarbonisation that have a realistic prospect of delivering benefits to existing and/or future energy consumers.

Further information on eligibility for the scheme, and how to apply, can be found on the EST webpage.

Covid 19 - Supplementary Guidance on the Allocation of Redress Funds

In addition to the matters set out in the Authority Guidance, the Authority expects the Service Provider to prioritise the allocation of funds to support energy consumers in vulnerable situations who have been negatively impacted by the effects of COVID-19.

The Service Provider may do this by prioritising charitable projects that provide fuel vouchers for prepayment meter customers. This prioritisation of funds was initially in respect of rounds 7 and 8 and has been extended to cover the winter months of 2020.