Oct 17, 2017

Energy regulator extends vulnerable household protection this winter

Ofgem, Office of Gas and Electricity Markets, announced last week that its prepayment safeguard tariff will be extended to a million more vulnerable households this winter. This move is expected to save consumers on average £120 a year. The UK energy regulator, together with the Government, is planning to extend price protection to a further two million vulnerable households next year.

 

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Ofgem is urging energy suppliers to “step up efforts” to help customers switch to better value deals. In order to facilitate this request, Ofgem is introducing new rules. These will allow suppliers to move customers, whose contracts are ending, onto another fixed deal instead of a poor value standard tariff.

In other news, Ofgem’s latest annual report shows that customers accrue more than £600 on average in unpaid bills. The report further demonstrates that as the number of customers in debt keeps falling, the amount owed keeps growing. This means that consumers’ debt keeps building up in unpaid bills before they start paying money back.

Further statistics from Ofgem’s consumer vulnerability report:

  • The number of disconnections for debt fell to 210 in 2016. This is a 17% decrease from 2015 levels, and a dramatic fall when compared to 8,300 a decade ago.
  • 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.
  • Average debt for electricity accounts is £628 (a 7% increase from last year), while gas customers owe an average £622 (a 5% increase from last year).
  • 27% of indebted customers are on repayment plans with SME suppliers, compared to 62% with large suppliers.
  • The number of prepayment meters installed for debt under warrant has fallen. In 2016, there were 41,000 meters for electricity customers and 39,500 meters for gas customers, compared to 2013 levels of 55,000 and 57,500 respectively.
  • Nearly four times as many indebted prepayment customers switched to prepayment tariffs with different suppliers in 2016 through the Debt Assignment Protocol. However, according to Ofgem the proportion of applicants who successfully switch is at only 5%.

What does Ofgem expect?

The following actions are expected from Ofgem when customers are struggling to pay their bills:

  • Offering a range of payment options. (Direct Debit, Social Security benefit deductions etc)
  • Agreeing repayment plans based on ability to pay
  • Preventing debt build up.

What makes up your energy bill?

We previously explored Ofgem’s infographic regarding the breakdown of bills, prices and profits in the energy market.

 

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