Suppliers must do more to help those in debt, Ofgem has said, as new research shows that customers are building up on average over £600 in unpaid bills on their gas and electricity accounts before suppliers step in to help them manage paying it back.
Ofgem has published its annual report on how suppliers treat their customers in vulnerable situations, including those in debt and at risk of being disconnected.
The report finds that in some respects, suppliers are doing more to help such customers. For example, suppliers now offer customers a near-record number of free ‘Priority Services’ such as gas safety tests and meter readings, to help them manage their energy day today.
The number of disconnections for debt also fell to 210 last year. This is part of a long-term fall, from a peak of 8,300 disconnections a decade ago, following a crackdown by Ofgem.
The number of customers in debt to their supplier has fallen by 9% to 971,362 for gas customers, and by 3% to 1,195,635 for electricity customers over the past year. This again shows that industry is making good progress in some areas.
However, some suppliers are letting those that are in debt build up larger unpaid bills before stepping in, and helping them start paying it back by putting them on a manageable debt repayment plan. Consumers now owe on average £628 before they start paying back debt on their electricity accounts, a 7% increase from last year. Gas customers owe on average £622, a 5% increase from last year (2).
These suppliers performed significantly worse than the industry average and Ofgem is calling on them to reflect and act quickly. Npower, Utility Warehouse, Ecotricity, iSupplyEnergy, and First Utility, let customers build up over £800 on average in electricity debt before they start paying it off. On Gas npower, Utility Warehouse and Spark Energy let customers build up an average debt of over £800.
Ofgem has recently announced plans to extend its safeguard tariff for prepayment customers to around 1 million vulnerable households this winter to help them save on average over £120 a year. This is in addition to the 4 million consumers currently protected by the prepayment meter safeguard tariff.
Ofgem has introduced a tough new overarching rule for suppliers to treat vulnerable customers fairly, including identifying them and taking extra action to support them.
Rachel Fletcher, Ofgem’s Senior Partner for Consumers and Competition said “Paying off energy bills is a major concern for many customers in vulnerable situations. When suppliers let big debts accrue, it’s a sign that they’re not spotting debt or stepping in early enough to help customers who are struggling to pay bills.
“We want the industry to demonstrate that it is identifying and supporting these customers in a timely way. We will be monitoring suppliers to make sure they make long-term improvements on bringing down debt. Under our new rules, suppliers must identify vulnerable consumers and show they’ve taken extra action to treat them fairly. Meanwhile we’re introducing a safeguard tariff this winter which will save 1 million vulnerable customers £120 on average.”
Gillian Guy, the chief executive of Citizens Advice, said: “After a decade of low wage growth, people’s wages are now falling, whilst the cost of essentials like gas and electricity are rising. The most expensive tariffs have gone up by £89 on average in the last year.”