Energy regulator Ofgem has confirmed plans to strengthen protections for customers who are struggling to pay their energy bills this winter. Following a consultation in June,
The regulator is introducing new licence rules for suppliers from 15th December. One of the rules will require suppliers to offer emergency credit to customers struggling to top up their prepayment meter, many of whom are likely to be in vulnerable circumstances. This could be because they temporarily cannot afford to top up or get to their local shop to top up because of a mobility issue or due to self-isolation for example.
Suppliers will also have to offer extra prepayment credit for households in vulnerable circumstances to provide more breathing space while working out alternative arrangements to pay.
These requirements will help reduce the number of prepayment customers who go without energy or “self-disconnect” after running out of credit on their meter.
In March this year, suppliers voluntarily agreed to support vulnerable customers through COVID-19, including those on prepayment meters facing difficulties in topping up. The new licence rule will require suppliers to offer this extra protection.
Another new licence rule Ofgem is introducing will require suppliers from 15th December to put customers in debt on realistic and sustainable repayment plans.
This means suppliers will have appropriate credit management policies, make proactive contact with customers, and set repayment rates based on ability to pay5. Many suppliers already have this in place, but making it a formal licence requirement will ensure more customers are helped.
Philippa Pickford, Director of Retail at Ofgem, said “Suppliers have stepped up to the challenge of supporting their customers during the COVID-19 crisis, especially those in vulnerable situations.”
“Customers who are struggling to pay their bills should contact their supplier as soon as possible. The extra protections we have announced today will help ensure they get some breathing space this winter.”
“Alongside our wider programme of support for vulnerable customers, Ofgem has also capped and reduced default tariffs so these customers always pay a fair price for their energy.”
Joanna Elson CBE, Chief Executive of the Money Advice Trust said“Today’s announcement of new protections from Ofgem are welcome and come at a crucial time for millions of households. These measures, which build on the voluntary agreement between suppliers and the government made in March, should help more vulnerable customers this winter.”
“No one should face a choice between heating or eating, and Ofgem’s new protections will help reduce this risk at time when households are struggling through the impact of covid-19.
“I am encouraged to see that the regulator is improving support for customers already struggling by requiring all suppliers to offer customers in debt realistic repayment plans based on what they can afford to pay.”
“There’s only so much that individual regulators can do, however. The Government’s temporary changes to Universal Credit need to be extended, including maintaining fairer access to Universal Credit for the self-employed beyond November, and making the current temporary £20 a week uplift permanent.”
Dame Gillian Guy, Chief Executive of Citizens Advice, said “This raft of new protections from Ofgem should help more people who are struggling to stay afloat.”
“Energy is an essential service and everyone should be confident they can adequately heat their home and protect their health – especially during a global pandemic.”
“We’ve been pressing for the measures agreed between government and energy suppliers to help people through the coronavirus pandemic to be extended and widened, so we’re very pleased to see this announcement from the regulator.”
“Even with this short term support from suppliers, many people will still struggle to pay for the basics. Government needs to do more to support those who need it most, including making the temporary uplift to Universal Credit and Working Tax Credit permanent.”
Natalie Hitchins, Head of Home Products and Services at Which?, said “With energy bills expected to rise and tighter coronavirus restrictions returning to many parts of the country, it is good to see the regulator taking steps to protect vulnerable customers and ensure they can stay warm this winter.”
“Anyone facing financial difficulty or struggling to pay their energy bills should speak to their provider about what support may be available to them. Households could also potentially save themselves hundreds of pounds a year by switching to a provider offering a cheaper deal and possibly better customer service.”
Whilst Peter Earl, head of energy at comparethemarket.com, said “These measures being introduced by Ofgem will provide much-needed reassurance to customers who find their finances under pressure as a result of the pandemic. With much of the country in a renewed state of lockdown, the increased protections for vulnerable customers is timely.”
Our own research shows that, due to lockdown and an increase in people being at home more of the time, many households could be nearing the end of the year owing an additional £294 to their energy supplier because of increased consumption. This is a major bill shock for many households, and providing sensible repayment plans and additional support will undoubtedly be a lifeline for many people. Households should also consider whether they are getting value for money from their current energy supplier. Switching supplier regularly is a simple and effective way to save hundreds of pounds on your annual energy bill, as energy customers on a standard variable tariff tend to pay considerably more than people on a one or two-year fixed term deal.”