Ofgem strengthens protections for customers struggling with energy bills

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Ofgem is introducing new licence rules for suppliers from 15 December to strengthen protections for customers who are struggling to pay their energy bills this winter.

In June 2020, Ofgem published a statutory consultation on Self-disconnection and self-rationing final proposals.

Today’s decision confirms Ofgem has decided to proceed with the proposals set out in the statutory notice.

Philippa Pickford, Director of Retail at Ofgem, commented on the announcement: “Suppliers have stepped up to the challenge of supporting their customers during the COVID-19 crisis, especially those in vulnerable situations.

“Customers who are struggling to pay their bills should contact their supplier as soon as possible.

“The extra protections we have announced today will help ensure they get some breathing space this winter.

Alongside our wider programme of support for vulnerable customers, Ofgem has also capped and reduced default tariffs so these customers always pay a fair price for their energy.”

One of the new rules will require suppliers to offer emergency credit to customers struggling to top up their prepayment meter, many of whom are likely to be in vulnerable circumstances.

This could be because they temporarily cannot afford to top up or get to their local shop to top up because of a mobility issue or due to self-isolation, for example.

Suppliers will also have to offer extra prepayment credit for households in vulnerable circumstances to provide more breathing space while working out alternative arrangements to pay.

These requirements will help reduce the number of prepayment customers who go without energy or “self-disconnect” after running out of credit on their meter.

In March this year, suppliers voluntarily agreed to support vulnerable customers through COVID-19, including those on prepayment meters facing difficulties in topping up.

The new licence rule will require suppliers to offer this extra protection.

Another new licence rule Ofgem is introducing will require suppliers from 15 December to put customers in debt on ‘realistic and sustainable’ repayment plans.

This means suppliers will have appropriate credit management policies, make proactive contact with customers, and set repayment rates based on ability to pay.

Many suppliers already have this in place, but making it a formal licence requirement will ensure more customers are helped.

Ofgem’s Consumer Survey 2019 found that of the 4 million households using prepayment meters, around one in seven had self-disconnected their supply in the past 12 months.

Prepayment customers are more likely to self-disconnect if they are in debt and are more likely to be vulnerable and in fuel poverty.

“Self-rationing” is when customers deliberately limit their energy use to make their credit last longer or save money for other goods or services.

Recent research by Citizens Advice has found that while most disconnections were related to practical factors, 29% were the result of not having enough money.

11% of disconnections were due to people being unable to top up due to self-isolating and 10% were due to the top-up shop being closed.