Recommendation 48

HM Government · verbatim extract Accepted

The Government is determined to ensure that vulnerable consumers at risk of, or in debt, are supported and protected, particularly as a result of recent higher energy prices. The Energy Price Guarantee will ensure that a typical household in Great Britain pays an average £2,500 a year on their energy bill, for the next 2 years, from 1 October 2022. Earlier this year, Government announced it is providing £37 billion worth of support to help consumers with the impacts of high global gas prices. We are also seeking to help households reduce their energy costs in the long term through improving the energy efficiency of their homes. Energy efficiency measures are available to low income and vulnerable households through multiple schemes including the Energy Company Obligation, the Social Housing Decarbonisation Fund and the Home Upgrade Grant. Under the Industry Initiatives element of the Warm Home Discount scheme, energy suppliers can fund financial and energy-related measures including energy debt write- off. Suppliers can write off up to £2,000 per household, to provide meaningful relief at the same time as maximising the number of households who can be supported. There is an overall cap on the amount of Industry Initiatives funding which can be used for debt write-off so as to provide a balanced package which protects other interventions, such as energy advice and energy efficiency measures. The cap also reduces the risk of historic or ‘bad debt’ being written off under the scheme. We have reserved half of this debt write-off cap for customers on pre-payment meters, as pre-payment meter customers in debt are particularly at risk of self-disconnecting. The Government’s Breathing Space scheme gives consumers temporary legal protections from debt collection activities, allowing them to set up a debt solution without being chased for payments or accruing interest. There are additional protections for those receiving mental health crisis treatment. In the first 12 months of the scheme operating, since May 2021, there were 69,613 Breathing Space applications. 14 Responses to the Committee’s Third Report of Session 2022–23 It is also important that the regulatory framework supports those in or at risk of debt. Ofgem’s Standard Licence Conditions require energy suppliers to offer customers a range of payment options when they identify a customer that is in payment difficulty. These include deductions directly from benefits via Fuel Direct, agreeing a tailored repayment plan with a customer, or the installation of a prepayment meter where it is safe and reasonably practicable to do so. When agreeing a repayment plan with their supplier, customers are protected by Standard Licencing Condition 27.8 – the Ability to Pay clause. This requires energy suppliers proactively to identify customers who may be in payment difficulty and ensure that repayment rates are set at a level which is appropriate for the individual customers circumstances. Any debt repayments need to be assessed according to this principle and need to be manageable for the customer. for the non-payment of debt. Due to this, disconnection of customers for debt is very rare. During the whole of 2021, there were 21 disconnections for non-payment of debt in electricity and no disconnections in gas. No electricity or gas disconnections were recorded in Q1 2022. Ofgem publishes data on customer debt on a quarterly basis, arising from analysis of data gathered under Social Obligations Reporting. The latest publicly available data was published in June 2022, including on the number of accounts in debt and average level of debt. We intend to publish updated analysis at the end of September 2022 and quarterly thereafter.