New energy license conditions to protect struggling customers

Energy customers struggling to pay their bills will have more support from this December, the industry regulator has announced.

From 15 December, suppliers will be required to offer emergency credit to customers struggling to top up their prepayment meter, many of whom are likely to be in vulnerable circumstances.

This may be because they temporarily cannot afford to top up or are self-isolating and cannot leave their home to do so.

Suppliers will also have to offer extra prepayment credit for households in vulnerable circumstances to provide more breathing space while working out alternative arrangements to pay.

The new license requirements follow a consultation released in June addressing concerns about self-disconnection and self-rationing.

In March, energy suppliers voluntarily agreed to support the most vulnerable, including PPM customers facing difficulties in topping up while self-isolating or in financial distress.

The regulator has previously said that even before the pandemic it had concerns about increasing numbers of PPM customers who self-disconnect, or go without energy, after running out of credit on their meter. Last year it consulted on requirements for suppliers to identify customers who are self-disconnecting and self-rationing and provide appropriate support.

Another new license rule Ofgem is introducing will require suppliers to put customers in debt on “realistic and sustainable” repayment plans.

This means suppliers will have appropriate credit management policies, make proactive contact with customers, and set repayment rates based on ability to pay.

The regulator added many suppliers already have this in place, but that by making it a formal license requirement more customers will be helped.

Industry welcomes license changes

Today’s proposals have been welcomed by charities representing the sector.

Adam Scorer, chief executive of National Energy Action, said: “As incomes fall and more people are needing to spend longer at home using energy, millions of the poorest energy consumers are having to choose between heating their home adequately or falling into debt. It is therefore welcome to see Ofgem committing to these basic, yet vital, steps and ensuring they are in place for this winter.

“Suppliers should now look to embrace these new obligations to continue to help millions of customers who are wrestling with the long-term economic impact of the pandemic.”

Matthew Cole, chair of trustees at Fuel Bank Foundation, said: “This is something that Fuel Bank Foundation has been advocating for some time and will benefit those who don’t have access to emergency credit and therefore come to us for help.

“Emergency credit can provide immediate respite that avoids the risk of self-disconnection. Some suppliers provide a £50 standard emergency credit to all customers, where others offer none. Ensuring all suppliers provide this facility will give some surety for customers, and act as a safety net for some of the most vulnerable in society.

“In addition to financial support, there needs to be targeted, coordinated and easy-to-action advice given to customers to mitigate the situation whilst credit is being used and to avoid them requiring emergency credit again in the future.”

Gillian Guy, chief executive of Citizens Advice, said: “Energy is an essential service and everyone should be confident they can adequately heat their home and protect their health – especially during a global pandemic.

“We’ve been pressing for the measures agreed between government and energy suppliers to help people through the coronavirus pandemic to be extended and widened, so we’re very pleased to see this announcement from the regulator.

“Even with this short-term support from suppliers, many people will still struggle to pay for the basics. Government needs to do more to support those who need it most, including making the temporary uplift to Universal Credit and Working Tax Credit permanent.”