WIREDGOV

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.

• Number of customers in debt falls, but amount owed grows as customers build up on average more than £600 in unpaid bills on their gas and electricity accounts before they start paying money back
• Some  suppliers let high numbers of customers build up on average over £800 debt before repayments start
• Ofgem calls on all suppliers to spot severe debt earlier, and step in to help customers manage it

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 (1).

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 to day.

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.

At the same time, 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 comments: “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 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.”

Notes to editors

1. Ofgem’s report Vulnerable consumers in the retail energy market: 2017 gives an annual overview of suppliers’ performance on vulnerability, analysing supplier data on debt, disconnections, PPM and warrant installations, and on the non-financial services they offer customers under the Priority Service Register.
2. The £600 average debt build-up includes new debt arrangements for 2016, and historic debt that customers are still repaying. The figure applies separately to gas and electricity accounts. However the average debts can’t be totalled, as it’s possible for customers to have debt against both their gas and electricity accounts, or only one of their accounts.  
3. Under Ofgem’s rules on debt, suppliers must be timely in putting indebted customers on tailored repayment plans based on their ability to pay. 
4. The following suppliers have over £800 average ‘take on’ debt. This does not include suppliers with very low numbers of customers on debt repayment plans.

Note: iSupplyEnergy changed ownership on 21 June 2017 and is now owned by Vattenfall.

We continue to work with suppliers to ensure they are identifying customers in payment difficulty and preventing debt from building up.

5. Research suggests that vulnerable customers are often the most likely to be paying more than they need to for their energy:

• Forty per cent of households on the lowest incomes (under 16,000 per year) report they’ve never switched, compared with 30% of consumers on higher incomes (over £16,000) and 25% of those on the highest incomes.
• The Office for National Statistics found that last year, low-income households spent 9.7% of their budget on energy bills while those with the highest incomes only spent 2.9%.

6. Ofgem defines vulnerability as situations that prevent consumers from being able to manage their energy or engage in the market, and can include temporary situations like financial vulnerability and bereavement to permanent situations like disability.

Further information

For media, contact:

Ruth Somerville: 0207 901 7460

Media out of hours mobile: 07766 511470 (media calls only)

For investors, contact:

Martin Young: 0207 901 7114 

About Ofgem

Ofgem is the independent energy regulator for Great Britain. Its priority is to make a positive difference for consumers by promoting competition in the energy markets and regulating networks.

For facts, figures and information about Ofgem’s work, see Energy facts and figures or visit the Ofgem Data Portal. 

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