Energy suppliers are getting better at helping vulnerable customers manage their energy day to day, Ofgem’s research shows, but are still too slow at helping rising numbers of customers deal with debt. 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.
Over 850,000 and 650,000 free services were provided by suppliers respectively to vulnerable electricity and gas customers in 2018, through their priority service registers – an 8.5% increase for electricity and 4.4% for gas services from the previous year. These customers benefitted from additional support to help them manage their energy day to day, for example through braille or large print bills for visually impaired people.
The number of disconnections for debt also fell to a record low last year, with just 6 electricity disconnections and no gas disconnections.
The number of prepayment meters installed forcibly by suppliers under warrant to collect a debt fell by 15 percent to 71,000 in 2018, after Ofgem introduced new rules to encourage suppliers to cut down on this practice. The drop was mainly driven by British Gas, whom Ofgem engaged with as part of last year’s report.
Ofgem is concerned about a high number of forcible meter installations carried out by First Utility (now Shell Energy) and Utility Warehouse in 2018. (5) First Utility did not carry out any forcible installations in the last quarter of last year, and Shell has pledged to improve performance.
At the same time, however, there was more than a threefold rise in the number of smart meters switched remotely by suppliers from credit to prepayment mode to repay a debt (from 21,000 in 2017 to 70,000 in 2018).
Suppliers are bound by Ofgem’s rules to only install prepayment meters to collect debt where they have checked that it is appropriate for customers to pay by this method. Installing meters by force must be a last resort for suppliers.
Ofgem is concerned that some suppliers may be remotely switching smart meters to prepayment mode to collect debt inappropriately and without the customer’s active choice. Ofgem expects all suppliers to use the remote switching facility fairly and appropriately, and will monitor industry performance closely in this area.
Last year saw the overall number of customers in debt rise by 4.2 % to 1.31 million for electricity, and 4.8 % to 1.05 million for gas customers. Energy suppliers are bound by Ofgem’s rules to help their customers manage debt, including by putting them on an affordable repayment plan.
Yet, whilst the numbers of indebted customers on repayment plans rose slightly last year – 1% for electricity and 0.4% for gas – this was far outweighed by the increase in the number of those who owed money but were not put on any plan – a rise of around 8% for electricity (648,000) and 10% for gas (505,000) customers. This suggests that suppliers are not moving quickly or efficiently enough to put customers who owe money on repayment plans, potentially pushing them further into debt or hardship.
Ofgem is proposing to strengthen its rules around how suppliers manage their customers’ debt. This includes making it a licence condition that suppliers contact indebted customers, and check their understanding and ability to pay before setting up a debt repayment plan.
Mary Starks, Executive Director for Consumers and Markets at Ofgem said “Energy is an essential service, and suppliers must take particular care with those customers who are less able to manage and pay for their energy. We are pleased that suppliers are making such good progress on getting extra help to vulnerable customers that need it, for example by making their bills easier to access or read.”
“However, some suppliers are simply not keeping up with the rising numbers of customers who owe them money. It’s imperative that suppliers move quickly and efficiently to help struggling customers manage paying back their debts, or risk pushing them further into hardship.”