Citizens Advice calls for stronger ability-to-pay rules

Citizens Advice has urged Ofgem and the government to fast-track proposals to help customers who can’t pay their energy bills.

In response, the regulator has told Utility Week it is currently finalising a package to help struggling billpayers.

The plea from the consumer watchdog is included in a roadmap for energy retailers to handle customers during the next phase of the coronavirus pandemic.

The charity’s End of the Beginning report references research conducted last month in which thousands of energy customers were surveyed.

It expresses concern that many customers will be unable to pay back money owed through discretionary credits and payment holidays and will need a sustainable way to repay this support.

It urges suppliers to monitor payments, get in touch before debts build up and offer repayment plans based on a customers’ ability to pay.

The report adds that there is evidence that some suppliers have not always set repayment plans fairly, leading to severe impacts. Small and medium suppliers collect debt from credit customers at twice the rate of larger suppliers, for example.

The report recommends that Ofgem should take forward proposals to strengthen its ability-to-pay rules for repayment plans. It further recommends that government should design new solutions for those with unmanageable debts as a result of Covid-19.

It also calls for government, regulators and industry to aim for a single “ability-to-pay conversation”, so that customers who face debts in multiple areas do not have to have repeat conversations about the debt they are in, reducing stress over unmanageable debt.

An Ofgem spokesperson said the regulator shared the concerns expressed in the report and would consider the recommendations carefully. They added: “We will soon publish our final package of policy proposals to improve outcomes for those consumers who self-disconnect, self-ration, and struggle to pay their energy bills, following our consultation on this issue last year.”

Communication breakdown

The report also highlights the need for suppliers to proactively direct customers to available support.

It says that while most have provided some information on their websites, some smaller and medium-sized suppliers have provided no – or only partial – additional detail online to customers.

Polling of more than 2,000 customers in mid-May found 11 per cent of respondents said their gas or electricity supplier had offered to help them compared to 35 per cent who recalled their bank offering support.

In a poll of 1,000 pre-payment meter (PPM) customers, 60 per cent of respondents did not recall being given information or support. The charity added that as customer service operations normalise and lockdown is eased, energy suppliers should now be able to do more to proactively engage customers – particularly those who continue to be affected by shielding, self-isolation and job losses or extended furlough.

Following its findings, Citizens Advice called on suppliers to ensure they have established processes to identify customers in vulnerable circumstances and offer them proactive support. It added that the crisis has demonstrated that better data sharing on vulnerability between sectors, and with government, could improve delivery of support and called on the government to set up a taskforce to improve collection and sharing of data on vulnerability.

Self-disconnection

The report found that self-disconnection – where prepayment meter (PPM) customers experience an interruption to their supply due to a lack of credit – is a particular concern during Covid-19.

In total, 35 per cent of respondents who were PPM customers had self-disconnected in the previous year – a higher incidence of disconnection than found in past surveys, although these have used different approaches.

During the lockdown seven per cent of respondents had disconnected during the first month (by late April) and 35 per cent had disconnected for more than three hours. While no seasonal data on self-disconnection is available to compare this rate, based on respondents’ normal disconnection frequency, it may be lower than normal.

However, more research conducted by Accent on behalf of Ofgem and Citizens Advice suggests a higher rate of disconnection since lockdown. For example in late April, 15 per cent of PPM respondents said they had self-disconnected for affordability reasons. Research by Opinium for Citizens Advice in mid-May found 47 per cent of PPM respondents had disconnected.

Over the past year most disconnections were related to practical factors, but 29 per cent were the result of not having enough money. However, during lockdown, a smaller proportion of disconnections were due to practical factors.

Some reasons – like not being at home when the meter ran out – are likely to have declined due to the requirements to stay at home, which Citizens Advice says could help explain any decrease in overall disconnection rates.

Some practical factors were not lower than before lockdown:

• 11 per cent of disconnections were due to people being unable to top up due to self-isolation
• 10 per cent were due to the top-up shop being closed

Affordability reasons made up a greater proportion of disconnections during lockdown. In total, 44 per cent of disconnections during lockdown were due to insufficient money, with two thirds of these due to reduced income as a result of the virus.

The report recommends that once the agreement between suppliers and the department for business, energy and industrial strategy ends, retailers should not increase their use of disconnection for debt.

Finding a new normal for customer service

During the initial phases of the lockdown, suppliers restricted their services to prioritise emergencies and customers in vulnerable circumstances. Although Citizens Advice agrees this was the right thing to do, it says it has had negative impacts such as customers with urgent cases not understanding that and being unable to get the help they needed. Citizens Advice says suppliers should learn these lessons if restricted services need to be reimposed in the future.

It also warns suppliers not to use the crisis to push customers to use channels of communication they would prefer not to and insists an omnichannel approach, as recommended previously by Energy UK, should remain in place.

Where financial hardship means suppliers may be unable to provide an adequate service, Ofgem should take action where necessary to protect customers.

In response to the report, an Energy UK spokesperson said: “As the report highlights, energy suppliers have been working hard to support their most vulnerable customers during the most challenging of times. Although lockdown is easing and business is returning to something closer to normality with home visits and other work resuming – while closely observing public safety guidelines – suppliers are also well aware that households will continue to face financial difficulties and require help for some time to come.

“Suppliers will continue to do all they can to support customers and provide the right level of service and communication but it should also be recognised that many more households than usual will be struggling with bills and debts across the board and that, as the report states, the energy sector cannot solve this issue alone.”