- Ofgem proposals would strengthen the package of support being provided during COVID-19 into permanent requirements from this winter
- Proposals would reduce the number of prepayment customers temporarily going without energy and require suppliers to offer more support to all customers really struggling to pay their energy bills
- Those in financial distress will get some breathing space but ultimately all customers need to pay for the energy they use
Ofgem is consulting on plans to standardise and strengthen support for prepayment customers and for all customers who are struggling to pay their energy bills.
In March this year, suppliers voluntarily agreed to support vulnerable customers through COVID-19, including those on prepayment meters facing difficulties in topping up while self-isolating or in financial distress1.
Ofgem is now proceeding with proposals to make stronger protections for prepayment meter customers, who are more likely to be in vulnerable circumstances, into a permanent licence requirement.
Under these proposals, suppliers would have to offer emergency and friendly hours credit (for example, when top-up points are closed- see note below2) to all prepayment customers, plus offer additional credit for consumers in vulnerable circumstances to provide extra breathing space while working out alternative arrangements to pay. These would include customers who 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.
Ofgem has been concerned about increasing numbers of prepayment customers who go without energy or “self-disconnect” after running out of credit on their meter since before COVID-19, and consulted on initial proposals last year3. Many suppliers already provided extra support, typically £5-£20 credit per fuel at a time, but this was inconsistent across the industry.
Ofgem is also proposing to strengthen protections so that suppliers provide extra support to help customers struggling to pay their energy bills from this winter4. This includes setting repayment rates based on a customer’s ability to pay and monitoring these arrangements. Many suppliers already offer this support, but making it a formal licence requirement will ensure more customers are helped.
Jonathan Brearley, Chief Executive of Ofgem, said:
“I want to thank suppliers for their efforts during this crisis in keeping essential energy supplies flowing to customers, particularly those in vulnerable situations. These permanent protections will reduce the number of prepayment customers temporarily going without energy because they cannot afford to top up. It is always best for customers to keep up with their energy bills if they can. But at this time when many may face financial hardship, these proposals mean those who are struggling to keep up are assured of some breathing space.”
- In response to COVID-19, energy supply companies agreed principles to support vulnerable customers with the Department for Business, Energy and Industrial Strategy (BEIS), including practical support regarding top-ups, provision of advice, switching between credit and prepayment mode, and extending non-disconnection periods. We expect suppliers to continue to uphold the voluntary agreement with BEIS, and to provide support to impacted customers. Ofgem also wrote to suppliers in June 2020 on regulatory expectations from July 2020.
- “Emergency credit” is a fixed amount of credit provided to customers when their meter runs low or runs out to ensure continuity of supply. “Friendly hours credit” is provided overnight, at weekends and public holidays, when top up points may be closed and a customer’s prepayment meter runs low or runs out. “Additional support credit” is provided to customers in vulnerable circumstances who may have exhausted other options. We are proposing to make the offering of these credit functions by suppliers mandatory. The customer usually has to repay this extra credit when they next top up but we are making it clear with these proposals that suppliers should consider customers’ ability to pay and agree an affordable rate when customers are struggling to repay this credit. Suppliers must also improve how they identify customers who are self-disconnecting and keep a closer eye on vulnerable customers who might be self-disconnecting and self-rationing.
- Ofgem’s Consumer Survey 2019 found that of the 4 million households using prepayment meters, around one in seven had self-disconnected their supply in the past 12 months. Prepayment customers are more likely to self-disconnect if they are in debt and are more likely to be vulnerable and in fuel poverty. “Self-rationing” is when customers deliberately limit their energy use to make their credit last longer or save money for other goods or services. Ofgem previously consulted on these initial policy proposals in 2019.
- Ofgem’s Ability to Pay Principles would be updated and incorporated within the supply licence, requiring suppliers to: have appropriate credit management policies and guidelines; make proactive contact with customers; understand an individual customer’s ability to pay; ensure the customer understands the arrangement; set repayment rates based on ability to pay; monitor arrangements after they have been set up; engage with the customer after an initial occurrence of a failed repayment.
- These changes are part of Ofgem’s Consumer Vulnerability Strategy to ensure vulnerable consumers are not left behind. The strategy focuses on five themes including data, affordability, customer service, innovation and partnership working to drive improved outcomes for consumers in vulnerable situations.
- Help with energy bills and budgeting: If customers are struggling to pay for energy bills they should contact their energy supplier as soon as possible. Depending on their circumstances, customers may be eligible for extra help with their energy bills or services.
Customers can also find advice and help on managing debt and budgeting through:
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