National Energy Action (NEA) has warned of a “gathering storm” of debt across the utilities sector in the wake of the coronavirus pandemic.
In a paper published by the charity, its director of policy and research Peter Smith explains that existing debt issues within the water and energy sectors are being badly exacerbated by the crisis.
In the energy sector, suppliers agreed a series of emergency measures with the government at the start of the crisis in order to protect vulnerable customers during the pandemic and a similar commitment was agreed with the water sector.
Smith added that while this was welcome, current provision is not adequate enough to deal with the scale of the challenges.
The paper concludes that without an adequate response issues such as a reduction in income paired with increased energy usage, energy bill shocks as a result of meter readers being unable to visit homes and a housing stock which uses far more energy than needed, will lead to a greater propensity for debt, increased hardship and reduced spending power when the crisis subsides.
NEA goes on to highlight immediate actions to address these issues and calls on utility suppliers to be proactive in contacting their most indebted vulnerable customers urgently to ensure that they know about the support available. In addition, the paper makes the case for suppliers to have access to the shielded patients list (SPL) to directly provide debt relief assistance and wider support.
It adds that priority services registers (PSR) should include a specific financial vulnerability flag or ‘needs code’ as many of those in the greatest need to do not feature on PSRs. “Regulators should work together to amend the different PSRs to ensure that those in or at extreme risk of poverty are captured”, the report adds.
Furthermore, NEA calls on energy regulator Ofgem to immediately strengthen the monitoring and support arrangements for those at risk of self-disconnection, which it describes as “the most immediate and extreme expression of fuel poverty”. It adds that plans to ensure suppliers monitor and help address risk of self-disconnection need to be stronger and should add a common standard for accessing emergency and discretionary credit to suppliers’ licence conditions.
As debt levels rise, NEA says regulators should work together to establish and implement consistent ability to pay principles within sector specific licence conditions. This must include how suppliers will support customers to access professional debt advice so that customers can check benefits entitlements before debt repayment plans are agreed or signpost appropriate services when repayment plans are reviewed.
Going forward, the NEA believes that government schemes such as the warm home discount in the energy sector should be extended from April 2021 and further improvements, as well as expansion of the programme, should be implemented from April 2022.
Government should accelerate the repayment of utility debts by providing supplementary funding for payment-matching schemes, which NEA says could be done through payments towards a customer account.
Lastly, the paper calls on the government to address the impact of the crisis in wider policy making.
Specifically, it says enhancing domestic energy efficiency is “crucial” to stop needless expenditure on essential services. It cited the Conservative manifesto’s proposals pledging £3.8 billion on a social housing decarbonisation fund and £2.5 billion on a new home upgrade grant scheme in fuel poor homes. NEA added the proposals must be committed to in the government’s upcoming infrastructure strategy, wider plans for the recovery and the next comprehensive spending review.
Speaking to Utility Week Adam Scorer, chief executive of National Energy Action, said: “Most suppliers are doing a half decent job when a customer goes to them for support. But so many do not know what support is available and suppliers need to get on top of that.
“This is too big an issue to dump at the end of a supplier/customer relationship. Suppliers need to do everything they can to be more responsive and assist with long-term debt management and work with people who may be at risk of self-disconnection.”