Consumer Vulnerability Strategy: Social obligations reporting (SOR)

At-a-glance summary

There has been an increasing trend in the average level of remaining debt for domestic customers who have a debt repayment arrangement. In the last few quarters the debt for electricity and gas customers has continued to rise at a steady rate from Q2 2016 to Q2 2017, reaching £419 in gas and £438 in electricity. Q4 2015 was the first time since we started collecting data that the average level of remaining debt for electricity surpassed that for gas.

Methodology

This is a snapshot figure of the average debt that remained outstanding on the last day of the reporting period for customers repaying a debt. It only includes the outstanding amount of debt that the customer is paying as part of a repayment plan and does not include any debt incurred for consumption since the start of the repayment plan.

At-a-glance summary

The proportion of domestic customers repaying debt who are paying via a prepayment meter has stayed broadly static in the last three years. Gas customers continue to be more likely to repay a debt via a PPM than electricity customers.

Relevance and further information

On 1 April 2017 we introduced a cap on the amount suppliers can charge a domestic PPM customer. Suppliers must set their prepayment prices at or beneath this level. PPM customers have fewer competitive tariff choices and are exposed to the risk of self-disconnection. Since the PPM cap, prices for PPM tariffs have become more competitive with other payment methods.

Methodology

When a customer falls into debt, suppliers must always offer them a range of debt repayment options – including the option to repay via a PPM – to customers. If no payment arrangement is agreed, suppliers may obtain a warrant to install a PPM to secure payment for ongoing energy use and debt repayments. This must be a last resort to avoid disconnecting the customer. A debt repayment arrangement is an arrangement to repay debts which lasts more than 91 days/13 weeks.

At-a-glance summary

There has been a long term reduction in the number of domestic customers disconnected for debt. Between Q3 2016 and Q2 2017 the number of disconnections for non-payment of debt decreased to 121 for gas and increased for electricity from 249 to 268 disconnections in the same period the previous year. There is a seasonal effect with fewer disconnections between October and March.

Relevance and further information

Disconnecting a customer’s energy supply should always be a last resort and avoided wherever possible. SLC 27 prohibits suppliers from disconnecting pensioners during winter (October to March), and requires suppliers to take all reasonable steps to avoid disconnecting premises that include any pensioners, disabled or chronically sick customers in winter. Suppliers must not disconnect anyone whose debt they have not taken all reasonable steps to recover first by using a PPM.

Members of Energy UK also adhere to a voluntary code of practice known as the ‘Safety Net’. Among other protections, signatories have committed to not disconnecting customers in vulnerable situations at any time of year and to reconnecting customers who are subsequently identified as vulnerable as a priority and usually within 24 hours. Compliance with the Safety Net is independently audited. Further information about the code can be found on Energy UK’s website.

At-a-glance summary

This chart shows the number of domestic customers who are repaying a debt to their supplier on their gas or electricity account. This has fallen from around 5% in 2006 to around 2.5% in 2017.

Relevance and further information

The number of customer accounts repaying an energy debt has been decreasing since 2006, when nearly 5% of electricity customers and over 4.5% of gas customers were repaying a debt. There was a a peak in Q2 and Q3 2013, but the downward trend continued after this, reaching around 670,000 customers for electricity (2.4%) and 570,000 customers for gas (2.7%). The seasonal effects that were present up to 2013, whereby there was a drop in Q4/Q1 and a rise in Q2/Q3 has become almost insignificant since 2014, which is likely to be due to the reduction in the number of customers paying quarterly.

Methodology

This data reports the number of customers who have a debt repayment arrangement with their supplier on the last day of the quarter. These are customers who have entered a formal arrangement with their supplier to repay outstanding debts, including all prepayment (PPM) customers repaying a debt, and non-PPM customers on debt repayment arrangements extending beyond 91 days/13 weeks. It does not include those customers with a debit at the end of a payment scheme that will be rolled into a new payment scheme or those who have had their payments increased because previous payments were set too low. All customers on payment schemes (including direct debit) are excluded once the initial debt has been repaid.

At-a-glance summary

Customers in arrears are customers who owe a debt to their supplier, but do not yet have a debt repayment arrangement in place. The number of customers in arrears has grown slowly from when we started collecting data in 2012, to a peak in 2014 (at over 2% of electricity and gas customers). Since then it has decreased slowly, and, in Q1 2016, it reached its lowest level for gas customers since we started collecting data. In Q2 2017 1.9% of electricity customers and 1.8% of gas customers were in arrears.

Relevance and further information

There continues to be a seasonal pattern to energy debt. Debt generally falls towards the end of the year, when customers that pay quarterly are billed for the warmer months. It then rises in the spring when customers that pay quarterly fall into arrears following higher energy usage during the winter months.

Suppliers are required to offer domestic customers struggling to pay their electricity and/or gas bills a range of payment options:

• Payment by regular instalments through means other than a PPM (for example, direct debit)
• Payment by direct deductions from social security benefits received by the customer (such as Fuel Direct or Universal Credit)
• Payment through a PPM, where this is safe and reasonably practical.

Suppliers need to focus on preventing debt as much as they do on managing and recovering debt. Providing accurate, clear and regular bills and making early contact with customers can prevent customers accumulating debt. Suppliers have an obligation at this stage to provide energy efficiency information to customers in financial difficulties.

Methodology

These are accounts that have had a bill issued which remains unpaid for longer than 91 days/13 weeks where a formal arrangement to repay the debt has not been agreed.