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Back to the Future: long term vulnerability outcomes

Tom  Faulkner Tom Faulkner Analyst
30th June 2020

100 days have passed since the UK was placed into lockdown and, as the government looks to continue easing of restrictions, it’s worth reflecting on where we’ve been and start looking ahead to where we’re going. Thanks to papers from Citizens Advice and National Energy Action (NEA) we now have a better idea of how this lockdown period has affected vulnerable consumers and how support can be offered to those in need as we transition out of this initial lockdown period.

This is Heavy Doc.

In response to the crisis, the government and energy industry issued a joint agreement on protecting domestic energy customers during COVID-19, with a particular focus on identifying and prioritising customers who were impacted financially as a direct or indirect result of COVID-19. Principles under the agreement included: reviewing bill payment plans; reducing or pausing debt repayments; and providing information, advice and guidance to customers on sources of financial help.

One of the more obvious challenges that COVID-19 posed was allowing prepayment meter (PPM) customers to top up, especially those who had been told to shield. Citizens Advice research showed that only one third of PPM customers knew of the additional support that was available. This support included suppliers applying discretionary and emergency credit, and sending preloaded top up cards through the post. While smart prepayment meters have the potential to overcome some of these issues by allowing customers to top up remotely, there is still a way to go before such solutions are in place for everyone. Smart prepayment is also not a cure-all solution, and more deeply entrenched issues are still likely to prevail.

Making like a tree and getting out of here

Data shows those on PPMs are more likely to be in debt or arrears than those who pay by direct debit. There is an increased realisation that financial difficulties for PPM customers not only leads to self-disconnection and self-rationing, but can have a significant impact on customers’ mental and physical health. Just yesterday (29 June) we saw Ofgem’s final proposals on reducing self-rationing and self-disconnection. This further confirms that the regulator is keen for suppliers to be taking more responsibility for identifying those in vulnerable situations. The proposals include a new requirement on suppliers to take all reasonable steps to identify all PPM customers who are self-disconnecting and offer appropriate support in line with existing and new obligations. Additionally, there would be new requirements on suppliers to offer emergency and friendly-hours credit to all PPM customers and to offer additional support credit to customers in vulnerable circumstances.

As a part of these proposals Ofgem also wants to introduce the Ability to Pay principles into the licence. These were first introduced as guidance in 2010 and contain the key considerations Ofgem wants suppliers to take into account when assessing a customer’s ability to pay if they are in actual or potential payment difficulty. The NEA is particularly supportive of this, noting that it is important that customers do not enter into debt repayment plans that are unrealistic.

I Guess You Guys Aren’t Ready For That Yet. But Your Kids Are Gonna Love It.

In a time when the government furlough scheme is being scaled back and support programmes are nearing their end, there could be a new wave of those who are struggling financially. Looking at the macro economic picture we have barely begun to see the full impacts of COVID-19 and it is important that the support offered by suppliers does not end just because restrictions start lifting. If we are really honest with ourselves this isn’t even half-time when we look at the impacts COVID-19 may bring. It is important that in this next phase we can learn as an industry from what has already happened. Ofgem’s workstream to bring better support for those self-disconnecting and self-rationing is a welcome one, and there has been pressure on government in recent months to bring forward its Breathing Space legislation. It is essential that the regulator, government, and suppliers do not get complacent and to continue moving good initiatives from pipeline to reality.  

There has been an ounce of blessing in the fact that good weather has meant that homes are not as cold and dark as they could be if this had happened in the winter, but as the days start to get shorter it is necessary that vulnerable people are supported in the best possible way.

To find out more about our regulatory services, including our alerts service, bespoke weekly and monthly reports, and regulatory briefings please get in touch by emailing regulation@cornwall-insight.com or calling Cornwall Insight on 01603 604400 and ask for the regulations team.