Why energy companies must engage with struggling customers

Heating a family home is set to become more expensive again before the winter - gas and electricity price rises are widely expected. Over the past few years, utility bills have been taking up a greater proportion of household incomes. Price rises have heavily outstripped earnings growth. Of course, it's not just utilities - the cost of getting to work, putting food on the table and countless other necessities all demand a greater share of household income.

The result is that many are struggling to keep up.

In August this year our National Debtline service received a call every four-and-a-half minutes from someone with energy arrears.

A growing number of the UK’s energy consumers are now in a position where they have to make tough decisions about how to make ends meet. Our research shows that people can be remarkably resilient when faced with financial difficulty, but this doesn’t mean they always make the right decisions. We have spoken to people who have taken food from work to feed their family; people who have started cooking all their meals in one go, eating six cold meals a week; and people who have sold treasured possessions, even pets, just to ease the bottom line. But our research shows that far too few people do the one thing that stands the best chance of making a real, sustainable difference – seeking free, impartial advice.

As creditors to these struggling households, energy companies have a responsibility to help. This is not only a social responsibility, but also a financial responsibility to shareholders – customers who can’t pay their bills are of little business value.

The importance of ensuring households are managing a sustainable budget cannot be overstated. A sustainable budget means creditors get paid on time and that they can budget more effectively. Struggling households, meanwhile, are not faced with the stress of wondering where the next meal will come from.

So how do we help people find their way to a sustainable budget, one that makes sense for all parties involved?

This is where the advice sector comes in. The Money Advice Trust has for many years worked closely with the financial services sector to foster a clearer understanding between struggling households and their creditors.

Working with the British Bankers’ Association and the Finance and Leasing Association, we put together a clear, uniform budget sheet called the Common Financial Statement (CFS), which accounts for all the areas of expenditure a family should budget for. The CFS also sets out trigger figures, setting limits for reasonable expenditure for each line in the budget. This means creditors can judge an individual household’s situation with clarity, confident that any offers of repayment represent a fair and sustainable deal for both parties.

It is perhaps rare that the interests of a large company’s bottom line and those of a struggling household can meet so congruously, and yet that is the conclusion we must reach. The CFS is just one example of how the advice sector can work as a crucial intermediary between struggling households and creditors. Our National Debtline advisers helped callers repay £300 million to creditors in 2011. Over the next seven years about £2.4 billion of debt will be repaid by people who call National Debtline during 2012.

We are grateful for the support we have received from organisations in the energy sector in recent years; however, we believe there is far greater value to be garnered by energy companies that are willing to engage more closely with the work of the advice sector.

Joanna Elson, chief executive, Money Advice Trust

This article first appeared in Utility Week’s print edition of 12th October 2012.

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