Households struggling to pay for their energy will get emergency credit this winter under new regulations from the watchdog.
Providers will now have to offer emergency credit to customers struggling to top up their prepayment meter to provide breathing space while working out alternative arrangements to pay. Ofgem is introducing the new licence rules for suppliers from 15 December, following a consultation opened in June.
It is hoped this will help reduce the number of prepayment customers who go without energy or ‘self-disconnect’ after running out of credit on their meter. Households using such meters are generally more financially vulnerable.
Ofgem has announced a series of extra protections for vulnerable households this winter
Previous research from Ofgem found that of the four million households using prepayment meters, around one in seven had self-disconnected their supply in the past 12 months.
Vulnerable customers could be temporarily affected by the pandemic, as they may not be able to afford to top up or get to their local shop to top up because of a mobility issue or due to self-isolation.
The new measures follow on from steps already put in place in March this year when suppliers voluntarily agreed to support vulnerable customers through Covid-19, including those on prepayment meters facing difficulties in topping up.
Another new licence rule Ofgem is introducing will require suppliers 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.
Pre-payment meter customers are being encouraged to not self-disconnect and seek help
Philippa Pickford, Director of Retail at Ofgem, said: ‘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.’
Recent research from Citizens Advice showed significant numbers of people risk being pushed into a position where they can’t pay their essential bills and could face spiraling debts if the uplift to Universal Credit and Working Tax Credit is not extended beyond April 2021.
Dame Gillian Guy, Chief Executive of Citizens Advice, said: ‘This raft of new protections from Ofgem should help more people who are struggling to stay afloat.
‘Energy is an essential service and everyone should be confident they can adequately heat their home and protect their health – especially during a global pandemic.
‘We’ve been pressing for the measures agreed between government and energy suppliers to help people through the coronavirus pandemic to be extended and widened, so we’re very pleased to see this announcement from the regulator.
‘Even with this short term support from suppliers, many people will still struggle to pay for the basics. The government needs to do more to support those who need it most, including making the temporary uplift to Universal Credit and Working Tax Credit permanent.’
There is help available to households who are currently struggling to pay their energy bills
If customers are struggling to pay for energy bills they should contact their energy supplier as soon as possible.
Depending on their circumstances, customers may be eligible for extra help with their energy bills or services.
This could include Winter Fuel Payments, which are automatically credited to those who receive a state pension or certain other benefits – those eligible are typically paid between £100 and £300.
The other main scheme is the Warm Home Discount which is a £140 one-off payment for you to use on energy bills.
However, it is an opt-in scheme, so you will need to check if your supplier runs the scheme and if you fit their eligibility criteria.
Finally, if the temperature falls below zero Celsius for more than seven consecutive days, you may be able to get access to a £25 Cold Weather Payment from the Government for each seven day occurrence of sub-zero temperatures between 1 November and 31 March.
Richard Neudegg, head of regulation at Uswitch, said: ‘Ofgem acted quickly during lockdown to protect customers who were struggling to pay their energy bills – and it’s good to see ongoing protections will now be strengthened.
‘With the furlough scheme finishing at the end of the month and tighter Covid restrictions coming into place in many parts of the country, many households will find it difficult to make ends meet as the temperatures continue to drop.
‘It’s heartbreaking when those on prepayment meters make the decision to ‘self-disconnect’ where they let their energy shut off because they are afraid of the costs, especially at a time of year where we are starting to need our heating.
‘In these more difficult times, it’s important that suppliers continue to do everything possible to support vulnerable customers regardless of the Ofgem rules.
‘Anyone who is struggling to pay their bills, or top up their prepayment meter, should contact their supplier as soon as possible to find out what extra help could be available to them.’
Millions of people could be needlessly overpaying for their energy as they fail to switch to providers who offer cheaper deal.
They may also be missing out on the opportunity to help the planet and fight climate change, by switching to green deals that offer electricity from renewable sources and more environmentally-friendly gas.
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