Schemes such as the warm home discount (WHD) in energy or social tariffs in water could be used to flag potentially vulnerable customers to different sectors, a new report has recommended.
National Energy Action’s (NEA) ‘Surviving the wilderness’ report, published today (4 November), focuses on three sectors – energy, water and council tax. It concludes that common approaches to debt management can help customers to know what to expect at all stages of the process, and how to navigate the support options which may be available to them.
It details how data sharing between sectors can be used to help those struggling with household debts.
For example the fact that an energy customer is entitled to the WHD or a water customer to social tariffs, could be used to notify the other sector. This reduces the need for a customer to contact multiple organisations, which often leads to increased stress and anxiety.
The report highlights how while not always the case, water bills are often one of the first to be defaulted on as the consequences for doing so are lower than for other bills. It adds that a default on a water bill could be considered the first sign of financial difficulty if the customer fails or is unable to make the payment after being notified by their water company.
NEA argues that data sharing opportunities should be explored to notify other sectors of financial difficulty, allowing them to offer proactive support. This could be initiated by whichever company notices the issue first.
Additionally NEA highlights how both the priority services register (PSR) and powers within the Digital Economy Act can be used to quickly identify consumer needs and offer support. This may also include opportunities to share an indicator for eligibility for energy and water efficiency measures.
Utility Week has previously reported on the appetite for a shared PSR.
Without urgent action, the charity warns, millions will be stuck in a ‘wilderness of debt’ and could suffer from severe mental illness, a range of physical illnesses and even premature death.
Overall the report makes five key recommendations which it believes can be applied across all sectors to mitigate the impacts of personal debt and arrears following the pandemic and avoid low-income and vulnerable households falling deeper into financial difficulty.
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The government should bring forward ‘breathing space’ and extend the respite period offered
Next May the government’s 60-day breathing space initiative is due to be launched which halts enforcement action from creditors while those struggling with debt seek professional advice.
NEA says the current launch date will not offer protection to those impacted with job losses or reduced income once the government’s job retention scheme ends. As well as bringing forward the launch date in line with the end of furlough, the charity wants to see the 60-day respite period extended to six months.
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The government should make contributions for payment matching schemes
The report points to how some water companies offer payment matching schemes, whereby outstanding debt is written off after an agreed time providing all agreed payments have been made.
It argues that government should encourage the “consistent adoption of this best practice” across both the water and energy sectors, “as a minimum”. This will reduce pressure on consumers and reduce the likelihood of self-disconnection or self-rationing, in turn reducing the pressures on health and social services.
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Consistent ‘ability to pay’ and debt collection principles should be implemented across all utilities
NEA highlights how different sectors follow different principles and guidelines for debt management which can be confusing for consumers, making it difficult to understand and manage their debt journey across multiple sectors.
It calls for a more consistent approach, adding that essential service regulators should work together to establish and implement ‘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 income maximisation services when repayment plans are reviewed.
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Opportunities for maximising data sharing should be explored, including utilising existing mechanisms, such as building on the priority services register and acting on powers within the Digital Economy Act, to ensure that support is offered to customers moving into financial difficulty at the earliest possible opportunity
If a customer is unable to pay their water bill, this could be considered the first sign of financial difficulty due to the fact that water bills are often one of the first to be defaulted on, as the consequences for doing so are lower than for other sectors.
When a customer is shown as being eligible for support for social tariffs in water or the WHD in energy, a financial vulnerability flag could be shared notifying the other sector, and allowing them to make proactive contact with the customer.
Additionally, the priority services register (PSR) could be adapted to this end.
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All utility companies should consider how a single definition of ‘severe indebtedness’ can ensure customers are treated fairly
Finally, the report argues that by adopting a formal definition of ‘severe indebtedness’ as the point where the debt owed to a single provider exceeds the annual cost of the service provided, companies could measure the debt accrued against the customer’s annual cost to monitor the severity of their financial situation.
Report author Jess Cook, who leads the ‘People Living in Water Poverty and Fuel Poverty’ work programme at NEA, said: “Debt isn’t just about individual harm. It has a significant impact on utility suppliers and the wider economy. As we move into the colder months and towards Christmas, and especially given we’re set to move into a second national lockdown later this week, these impacts are likely to worsen rather than improve, but it doesn’t have to be the case.
“With sufficient will, we know it’s possible for utility companies, regulators and the UK government to make it easier for customers to manage their household debts. We have highlighted some clear steps to help the hardest hit by this crisis clear their utility debt. This would bring relief for millions of people and help increase spending, boosting local economies.”
“As highlighted in this report, utility suppliers quickly reacted to the first wave of this crisis by adapting the support they offered to those who were struggling. This, and the recent action seen by the government and Ofgem, is a good start, but if we are to ease the long-term economic impact of the pandemic and the terrible stress and physical affects debt is causing, we need to wake to the scale of this challenge and fast”, she added.