UK energy firms using debt collectors despite coronavirus agreement
Britain’s energy suppliers are continuing to use debt collectors to chase unpaid bills after promising to help households during the coronavirus pandemic by offering payment plans to struggling customers.
Under an agreement with the government, energy suppliers are expected to identify customers who might be in financial distress and offer to reassess, reduce or pause bill payments to help “reassure” homes during the coronavirus lockdown.
But many households and small businesses with outstanding balances on their energy accounts may still be targeted by debt collectors with warnings that action may be taken against them if they don’t pay their bills.
A letter sent by a debt collector on behalf of Shell Energy, seen by the Guardian, warns one customer that arrangements may be made for a doorstep collector to visit their home in order to chase an outstanding balance of £78.51.
It warned that Shell Energy would share the account holder’s details with credit reference agencies which could hurt their ability to switch energy supplier, apply for a mortgage or borrow money.
The letter was sent weeks after energy suppliers agreed to support customers who are financially impacted either directly or indirectly by the coronavirus lockdown.
Alok Sharma, the business secretary, brought in the measures to help households which “need additional support and reassurance” during the Covid-19 pandemic. They include an agreement that no customers should be cut off during the lockdown.
Natalie Hitchins, from the consumer group, Which?, said: “Many customers will have been financially impacted by the coronavirus, so it is concerning to hear that any energy supplier is using debt collectors to place pressure on customers who could be struggling during this difficult time, despite agreeing with the government to support customers in financial distress.”
The UK’s largest energy suppliers, British Gas and Ovo Energy, said they were continuing to use debt collectors to engage with their customers. Both companies said they had instructed their debt collectors to offer financial help on their behalf.
E.on UK, which merged with npower last year, said it was not handing any new customer details to third-party debt collection agencies but that its debt collectors would continue to pursue long-standing debts built up before the outbreak.
A spokesman for Shell Energy said a letter from a debt collection company “is a last-resort attempt to engage with a customer and only after we’ve repeatedly asked them to get in contact to see how we can help”.
According to a government spokesman, some suppliers had offered to defer payment deadlines by up to three months and had also suspended following up on debts as part of a package of measures to help households weather the Covid-19 crisis.
“This is a worrying time for people across the country and we would expect energy companies to take the current circumstances into account as they carry out their business,” the spokesman said.
There are also growing concerns over debt collectors who are targeting the UK’s microbusinesses, which are often family-run and may have been hard-hit by the lockdown measures put in place to stop the spread of the virus.
Ed Dodman, a director at the Energy Ombudsman, said: “What we have noticed in the early days of the lockdown is that the proportion of financially vulnerable microbusinesses coming to us for assistance is higher than it was before the outbreak, indicating that small businesses, in particular, may be struggling with these issues.
“The guidance is quite clear that energy suppliers must consider whether their customers are in financial difficulty and whether they can offer assistance. This is not a carte blanche for customers to avoid paying bills but suppliers should be sensitive to the circumstances of their customers on a case by case basis.”
The Guardian
All eyes on new Centrica chief who takes the helm at a time of acute stress
The knives were out for Iain Conn at British Gas owner Centrica’s annual general meeting last year. The combative chief executive had presided over a 70pc slump in the share price during his four years in charge, and shareholders were fed up.
Outside the QEII centre in Westminster, one shareholder told news cameras she wanted Mr Conn “to be humiliated”. Another reminded the 57-year-old that his £766,000 bonus during 2018 was the “equivalent of £1 for every customer you lost”.
Mr Conn has now left and his successor, Chris O’Shea, will be saved that public torment. The coronavirus crisis means there will be no shareholders at this year’s AGM, just the necessary directors going through the legal requirements online.
Shareholders – among whom are about 600,000 retail investors as a legacy of the Eighties privatisation – have been encouraged to vote, but to ask questions only via an online form.
There will certainly be plenty of questions for the new boss Mr O’Shea, the former finance chief now in charge of turning around the fortunes of the UK’s largest household energy supplier and one of Britain’s most-watched businesses, at a time of acute stress.
Already under pressure from rising competition, heavy regulation and the shift towards renewable energy, it is lurching towards more serious problems given the havoc wreaked by coronavirus.
Mr O’Shea, who joined Centrica from Smith’s Group in 2018, has a far lower profile both in the industry and in public than Mr Conn. He is seen as a defensive choice as Centrica hunkers down to try and sort out its own problems, rather than lead the industry as it typically has done. Yet his actions will need to be bold.
He takes the helm at Centrica, which employs 27,000 people in the US and the UK, just as it tries to move away from oil and gas production to focus on household customers and, in particular, selling them high-margin gadgets such as thermostats and door sensors.
It was put on that course by his predecessor Mr Conn, who wanted to insulate the business from pressures including the challengers which have by now pinched about 20pc of the market from the Big Six suppliers, and the Tory government’s price cap on energy bills, which has sliced margins.
He fixed his gaze on that strategy through profit warnings, one million customer account losses, and thousands of job cuts, eventually stepping down last July when he slashed the dividend by a more than expected 58pc to 5p.
Ominously for his successor, he also downgraded expectations for the consumer products businesses, leaving weary investors questioning from where growth will emerge.
Whether Mr O’Shea sticks to that course remains to be seen, but for now he has more immediate problems to address. The lockdown has weakened demand for power, weakened oil and gas prices, and weakened customers’ ability to pay their bills.
Meanwhile, the sales of Centrica’s oil and gas division, Spirit Energy, and nuclear power plants have been suspended due to the disordered markets.
Questions are growing about whether Centrica can hang onto its all-important investment grade credit rating, without which it will struggle to get decent terms to trade power. It was reaffirmed in late March, but events are moving rapidly.
In a detailed figure-crunching published on Wednesday, analysts at Jefferies estimated that power demand among Centrica’s business customers could fall by 7pc across the year if the lockdown lasts until mid-June, and bad debts could increase by 2.5pc, leading to a £200m profit hit. “Overall, Centrica might be able to hang onto its rating for now,” Jefferies said, “but we see risks skewed to the downside.”
With debts of £3.1bn, Centrica is slashing spending by about £400m, cancelling bonus payments, and the proposed final 2019 dividend payment of 3.5p per share.
Analysts say that, to raise a potential £1bn, Mr O’ Shea could now put its US energy supply division, Direct Energy, on the block. It is a strong business, with customers rising 6pc last year to 2.8 million.
Analysts at Barclays, meanwhile, believe a rights could issue could provide some certainty and boost the share price. “You would have to think they are running the numbers on it,” says one industry source. “The equity market is functioning and it is prepared to recapitalise companies that are having a challenge now but need to exist.”
In the meantime, Centrica is looking, cheap. Private equity is said to be “running the rule” over Centrica, whose shares have fallen to 31.74p, valuing it at £1.84bn.
It could also attract interest from oil and gas giants such as Shell, which is keen to reduce its reliance on fossil fuels. Rival E. ON’s tie-up with Octopus’s technology platform Kraken, meanwhile, shows a Big Six supplier catching up with the challengers.
Daily Telegraph
EDF poised to lodge Sizewell C nuclear plant application
EDF is poised to submit a planning application for a large nuclear power station on England’s east coast despite opponents’ complaints that Britain’s coronavirus lockdown will hamper proper scrutiny of the project.
Suffolk residents have raised concerns about how they can examine and contest the application for the Sizewell C plant after government scientific advisers warned that disruptive social distancing measures would probably be in place all year.
The French utility has been working with Chinese state-owned nuclear company CGN on the plans for Sizewell, which could provide 7 per cent of the UK’s electricity.
The two companies are already constructing Hinkley Point C in Somerset, the UK’s first new nuclear plant in three decades, but the project has been hit by cost overruns and delays. EDF warned last year that Hinkley’s completion could cost an extra £2.9bn, taking the total to £22.5bn.
Alison Downes, a Suffolk resident who represents campaign group Stop Sizewell C, said submitting the application during the Covid-19 pandemic would “escalate anxiety at a time when people have got a huge amount of others things to be anxious about”.
She added that people would not be able to hold meetings to discuss the company’s plans while social distancing measures were in place.
EDF, which is expected to submit its application in early May, said it had planned to do so at the end of March but delayed because of the pandemic.
Humphrey Cadoux-Hudson, managing director for nuclear development at EDF Energy, the French utility’s UK division, wrote to Suffolk parish councillors this month saying the company had received assurances from the UK’s Planning Inspectorate that it had the resources to process the application during lockdown.
He said EDF would discuss with the inspectorate the possibility of delaying the “examination phase” of the process — during which hearings are held with stakeholders — “until they are happy that no parties will be disadvantaged”.
FT Weekend
Energy usage figures have shown how Brits’ daily routines have changed since the start of the lockdown – from eating their dinner earlier than normal to waking up later.
With the nation encouraged to stay home due to the coronavirus pandemic, people are shaking up their routines and using energy at different times of the day.
The data suggests that with no commute to the office, people are waking up later and there is now a surge in electricity usage being seen at 8am, compared to 7am pre-lockdown.
Lunchtimes appear to be taking place at around 1pm and bring a 38 per cent increase in energy usage, as households combine energy needed to cook food with working from home.
The figures from British Gas, using data from more than a million of its smart meter customers, also show dinner time has been brought forward, with an energy spike now taking place at 6pm compared to between 7pm and 8pm previously.
Bedtimes are showing to be roughly the same with demand dropping off between 10pm and midnight, as expected.
However, it seems more Brits than ever have become night owls, with some staying up late to watch TV or play video games, with higher electricity use being seen between 1am and 4am.
Joanna Flowers, British Gas service and repair engineer, said: “The world is a very different place compared to this time two months ago. When it comes to energy, we’ve changed how much we use, and when we use it.
“There are some simple things people can do around the home to save energy, and to troubleshoot any small problems themselves. This helps minimise demand for home visits, and enables us to prioritise vulnerable customers and emergency response cases.
“I can’t bear the thought of anyone going without a hot shower, so we are doing all we can to attend to emergencies while keeping people safe – like wearing protective clothing and asking customers to wait in another room while we get their boiler working.”
The Sun
Climate changes for good as the oil price tumbles
At 9am on Tuesday, Bernard Looney will don a black headset, stare into a computer screen and begin discussing his first set of results at BP.
Rather than being flanked by an army of advisers at the oil giant’s HQ in St James’s, central London, the Irishman is more likely to be sitting at his desk at home as he spells out the harsh financial realities of the Covid-19 crisis that has kept him — and millions of others — indoors.
Much has changed in the two months since the 49-year-old took charge of the FTSE 100 giant that employs 73,000 staff across 78 countries. The coronavirus has brought economies to a standstill as governments around the world have imposed measures to fight the human tragedy.
For the oil industry, it has spelt double trouble. The dramatic downturn, which led to a 25% fall in demand for oil to levels last experienced 25 years ago, coincided with a spat between Saudi Arabia-led Opec and Russia about supply. By the time a deal to cut production by an extraordinary 10 million barrels a day was reached a fortnight ago, it was too late — demand had fallen by 30 million barrels a day.
The impact was illustrated last Monday by the collapse in price of West Texas Intermediate, the headline American measure, to negative $37 (£30) a barrel: a sign of how desperate traders were to get rid of oil. The Brent benchmark plunged to levels last seen nearly 20 years ago. It ended the week at $21.44 a barrel, having started the year nearer $70.
Tackling the consequences of the Covid-19 crisis alone had sparked questions about the resilience of BP and rival Shell, which reports on Thursday. They were already scrambling to overhaul business models to respond to climate change. Now observers are debating whether the double hit from falling global demand and the geopolitical row make the climate change issue more distant — or a more pressing reminder of the need to diversify into other areas.
The first-quarter figures will start to show the financial pain, even before last week’s rout. BP’s underlying profits are forecast to fall to $710m from $2.3bn a year earlier, and Shell’s to $2.2bn from $5.3bn a year ago. For Shell, each $10-a-barrel change in the oil price knocks $6bn a year off its cashflow.
Among the questions they face is what the impact of this will be on dividends, and what will happen to their efforts to decarbonise. While the low oil price might be seen as an incentive to stop drilling for oil, it can also militate against the economic argument for climate change.
Nick Stansbury, head of commodity research at Legal & General Investment Management, said: “The transition has become more expensive, relatively, as a consequence of this.
“The cost of transition to a decarbonised economy is measured relative to the cost of maintaining the current one. If the oil price goes from $50 to zero, then relative cost goes up.” He sees addressing climate change as crucial. “We don’t look at ‘climate and carbon’ and investment returns as being separate questions,” said Stansbury.
According to Anne Richards, chief executive of Fidelity International, the crisis underlines the need for all companies to consider longer-term issues. “Companies that had invested more into thinking about the sustainability of their business models in advance, those that had focused on improving environmental, stakeholder welfare and corporate governance concerns prior to the current crisis, have generally outperformed their peers,” she said.
Energy giants are eager to show they take climate change seriously. Three years ago, Shell’s boss Ben van Beurden set an “ambition” target of halving its carbon footprint by 2050. He also led the £47bn takeover of BG in 2015, enhancing its position in less environmentally damaging natural gas.
A week ago, in the midst of the Covid-19 crisis, he set out a new aim — to be a net-zero emissions energy business by 2050 or sooner, saying that despite the pandemic, Shell needed to “also maintain the focus on the long term”.
Looney, who waited just a week after taking the top job at BP in February to set out groundbreaking goals for climate change, wrote on LinkedIn that he had been asked whether the Covid-19 crisis would make him abandon or water down his ambition to achieve net-zero emissions by 2050 or sooner.
“The answer is no. In fact, the current crisis has reinforced my belief in reimagining energy and reinventing BP. Climate change and the drive for the world to get to net zero have not gone away,” he wrote.
Michele Della Vigna, an analyst at Goldman Sachs, said there were two key issues to consider during the crisis: resilience and the potential for long-term opportunity. “They can really use it to foster the energy transition with a strong shift in their asset base towards lower-carbon technologies,” he said.
The emphasis on climate change had prompted questions about the ability of oil companies to maintain their dividends even before the current crisis hit.
After 35 FTSE 100 companies suspended or cut dividends, Russ Mould at AJ Bell calculated that Shell and BP accounted for 24% of the £75bn of dividend payments remaining.
The Times
Utility Week’s weekend press round-up is a curation of articles in the national newspapers relating to the energy and water sector. The views expressed are not those of Utility Week or Faversham House.