A report from Citizens Advice found that 28 per cent of consumers on out-of-work benefits and 16 per cent on tax credits were unable to keep their homes warm and an additional 14 per cent were behind with an energy bill.
The organisation predicts that 15 per cent of prepay customer self-disconnect from their energy supply at some point as part of their budgeting – claiming that welfare benefits are causing them to do so – with 73 per cent who self-disconnected during winter 2015/16, in receipt of at least one means-tested benefit.
The charity expects the issues around self-disconnection to continue as the number of prepay meters being installed increases year-on-year and welfare reforms continue to rollout.
Citizens Advice chief executive Gillian Guy said: “Welfare reform has had a huge impact on many people’s ability to balance household budgets.
“Seven in 10 people who receive benefits also behind on a household bill, it’s vital that companies’ approaches to debt collection support people affected by welfare change. We’ve seen lots of good practice from utility companies working sensitively with customers to collect arrears.”
The data also shows that energy is the second most significant expense for the average family at around £26 per week and water costing an additional £8. This represents around 9 per cent of total expenditure among poorer families.
Water bills tend not to be a priority for those struggling to pay bills due to no threat of disconnection, a lower probability of enforcement action and lower customer engagement. Energy tends to be one of the highest prioritised bills.
The report raised concerns about smart meters tackling the issues faced by prepay customers, as some large suppliers argued that although they will immediately know when a customer has run out of credit and can contact them, sometimes a drop in usage can be misleading due to change of appliances, a vacant property, or being away on holiday.
Citizens Advice said that energy providers have begun to make progress towards supporting financially vulnerable customers through letters more clearly signposting where customers can get help, information on energy efficiency measures and products aimed at helping those customers such as hardship funds. The charity also praises utilities providers on their understanding of welfare reform and for improving debt collection practices.
Recommendations from the organisation include improving the take-up of the warm homes discount and that future similar schemes include all domestic suppliers. It also calls for utilities providers and debt collectors to offer flexible repayment terms and make changes to the priority services register which currently does not move with the customer when they switch supplier and relies on the customer to re-register themselves.
Guy added: “As further reforms – such as Universal Credit – continue to roll out it’s more important than ever that companies and customers work together to avoid the build-up of unmanageable arrears.”