WIREDGOV

Report reveals that 5% of gas and electricity accounts are in debt, however the number of customers who have agreed plans to repay debt has risen Ofgem rules offer some respite for consumers in debt as disconnections fall and repayment rates either fall or remain stableOfgem encourages all customers who are in debt, or struggling to manage their bills, to contact their supplier to discuss their payment options

Ofgem has published its annual Social Obligations Report, providing information on suppliers’ performance in relation to debt and disconnection in 2012.

Key details from the report include:

• 1,358,764 electricity accounts and 1,194,853 gas accounts were in debt. A consumer may be in debt in both their gas and electricity accounts.
• The number of disconnections undertaken by suppliers fell across Great Britain to 557 in 2012. There were half as many electricity disconnections and two thirds fewer gas disconnections than in 2011.

The report offers a more detailed picture than previous years following an Ofgem review and improvements in supplier reporting. It reveals that a large number of consumers are facing significant debt in their energy accounts. However suppliers are responding to Ofgem requirements to take into account customer’s ability to pay when agreeing repayment plans, and only to disconnect as a last resort.

This led to disconnections falling to a record low, and was further demonstrated by repayment rates either remaining stable or falling from previous years as customers agreed plans that allowed them to repay debt over longer time periods. Suppliers reported that, on average, repayment arrangements agreed in 2012 allowed customers twice as long to repay their debt as those agreed in 2010. 35 per cent of customers repaying a debt were paying less than £3 a week.

The report also sets out further measures Ofgem will take to help consumers in debt, alongside our Consumer Vulnerability Strategy. These include bringing together debt advisors and small suppliers to improve their debt management.

Sarah Harrison, Ofgem’s senior partner for Sustainable Development said:

“Energy bills are rising and household budgets are very tight. It is more important than ever before that energy suppliers do all they can to help customers who are struggling to manage bills and are in debt.

“Ofgem’s regulations put obligations on suppliers and provide protection for consumers and today’s report shows how suppliers are responding to these requirements. Levels of disconnection are at an all-time low and suppliers are working to help customers in debt. But that is not enough. Suppliers must continue to reach out to consumers and promote free consumer services and help that is available to manage energy bills, working even more closely with debt and consumer advice agencies.

“As today’s report shows, Ofgem will monitor the action of suppliers, large and small, and the way they treat customers who are in debt and need help.”

Gillian Guy, Citizens Advice Chief Executive said:

“Recent rises in energy prices have put a strain on already tight budgets. Not only are people getting into debt with their supplier some are using payday loans or credit cards in order to cover the cost of their bills. 

“It is good that the number of disconnections is reducing, but there is still a long way to go to. If you are falling behind with your energy bill you should get in touch with your supplier straight away as they have a duty to help you. Your supplier could cut you off if they don’t realise you are struggling financially.”

-Ends-

Notes to editors:

1. In 2012 we reviewed the Social Obligations data that we collect. The review focused on ensuring that reporting remained comprehensive, fit for purpose and that suppliers were reporting each data item consistently. During the course of our review a number of suppliers identified errors in the reporting they had provided to us and arranged for these to be corrected. This means that some of the data used in this report differs from that previously published. In other cases, suppliers introduced new systems which may have affected the consistency of their reporting. As a result it is not always possible to compare data provided with that provided for previous periods.

Please note: This means that the number of accounts in debt, the average debt figures and the number of customers repaying a debt are not comparable to 2010/11 figures.

2. Additional key figures. All figures are as of the end of 2012 unless otherwise stated:

• There were over four million electricity Pre-payment meter (PPM) accounts and three million gas PPM accounts in 2012. 11 per cent of gas PPM customers and 8 per cent of electricity PPM customers were repaying a debt through their PPM.
• Suppliers reported that customers were repaying debts associated with 900,911 electricity accounts and 802,469 gas accounts across Great Britain at the end of 2012. This is a 16 per cent rise compared to the end of 2011.
• Where an account was in arrears and a customer had not yet agreed a repayment plan, electricity accounts had an average of £439 arrears and gas accounts had an average of £433 arrears.
• Where an account was in debt and a customer had agreed a repayment plan, electricity accounts had an average of £304 that remained owing and gas accounts had an average of £313 that remained owing.    

3. If a customer uses both gas and electricity it is possible for both their gas account and their electricity account to be in debt. ‘Debt’ refers both to customers who are in arrears but who are not yet on a formal debt repayment arrangement, and customers that are repaying a debt through a debt repayment arrangement. ‘Arrears’ are defined as any customer who has had a bill issued which remains outstanding for longer than 91 days/13 weeks and who has not yet set up a debt repayment arrangement. The number of customers in arrears is a new reporting metric. In previous reports we have only looked at customers that are in debt that have agreed a repayment plan with their supplier. 

4. Ofgem is the Office of the Gas and Electricity Markets, which supports the Gas and Electricity Markets Authority, the regulator of the gas and electricity industries in Great Britain. The Authority's functions are set out mainly in the Gas Act 1986, the Electricity Act 1989, the Competition Act 1998 and the Utilities Act 2000. In this note, the functions of the Authority under all the relevant Acts are, for simplicity, described as the functions of Ofgem.

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Chris Lock: 0207 901 7225
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