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Energy Regulator Plans Help With Bills Through 'Increased Consumer Debt'

Energy Regulator Plans Help With Bills Through 'Increased Consumer Debt'
5 min read

Exclusive: Energy regulator Ofgem is considering plans to help cash-strapped prepayment customers avoid getting disconnected – but only by getting into debt instead.

The plan has emerged alongside stark warnings that the energy price cap is expected to double in January, hitting £3,850 per year, according to experts. The price rise has been exacerbated by Russia's decision to cut the flow of its gas to Europe, which has pushed up wholesale prices.

Self-disconnection is where customers who use prepayment meters to pay for electricity or gas suffer an interruption to their supply because their meter falls to zero. Prepayment customers pay higher tariffs than most people, and are often on lower incomes.

With the surge in energy prices having a particularly heavy impact on disabled people, last week Ofgem officials met online with representatives of disabled people’s organisations (DPOs).

A senior staff member told the meeting that “there are actions on the table” to avoid so-called ‘self-disconnections’ by prepayment customers this winter, but that “this support will come at a cost”. When asked by attendees to clarify these comments, he indicated this support would be in the form of “increased consumer debt”.

He did not go into more detail on what this would mean. Prepayment customers – who need enough credit on their meters to pay for the energy they want to use – can currently ask for temporary credit from their supplier if they can’t afford to top up their meter, which then has to be repaid over time.

Prepayment meters have higher tariffs because of their additional costs. Low-income customers are often driven onto them after falling behind on their energy bills – a practice condemned as “unacceptable” by MPs on the energy select committee this week.

DPOs are concerned that Ofgem’s current direction of travel could simply push people into more debt – especially with inflated energy bills now predicted to last into 2024.

A spokesperson for Greater Manchester Disabled People’s Panel said: “Under the Equality Act it is entirely lawful to treat disabled people more favourably in order to remove barriers such as higher energy bills. We would urge Ofgem to look again at what they can do to ensure that energy companies lower the price of utilities rather than to focus on debt management.

“Despite best intentions, allowing disabled people to fall into debt, even if this is with lower and longer repayments, is a form of unequal treatment.”

“It wouldn’t really solve anything would it, because at the end of the day they’d have that debt hanging over them,” disability campaigner Anne Pridmore, who attended the meeting, told PoliticsHome. “Disabled people are worried enough without going into debt.”

Shell today announced nearly £10bn in quarterly profits, promising to pay out £6.5bn in shareholder dividends, while British Gas owner Centrica reinstated its dividend after reporting operating profits of £1.3bn for the first half of 2022. 

The government has already announced a series of measures to help households with inflation, but these were designed to address the rise in energy bills over the last year rather than the huge increase expected this October.

In addition, disabled people often have above-average energy usage – due to the electrical equipment they use to help with mobility and the need to maintain warm temperatures for health reasons – as well as trying to manage on benefits that are rising by far less than inflation.

“My own bills have gone up twice now, and when they go up again in October there's no way I'll be able to pay it,” said Pridmore, who has cerebral palsy. “We have a lot more costs than a lot of non-disabled people, because I have two wheelchairs that have to be charged up. I have an electric hoist for in and out of bed. I've got a profile bed [an adjustable electric bed], and an electric recliner in my lounge.  

“I don't walk at all – I'm a wheelchair user full time. And I have a 24 hour care package. So I have other implications such as more laundry. And like a lot of disabled people who have care packages, the local authorities are putting the charges up every year.”

DPOs are calling for the introduction of a cheaper ‘social tariff’ for those on lower incomes, protection against disconnection over winter for disabled prepayment customers, and for prepayment meters to be regulated the same way as standard tariffs. They are also urging proper consultation with DPOs and for a formal Equality Impact Assessment regarding any increase in the energy price cap in October.

“The support packages of utility companies simply do not go far enough in helping Disabled consumers facing extreme hardship and forced choices of energy rationing and self-disconnection – at risk to life,” said a spokesperson for Cheshire Disabled People Against Cuts. “Energy debt is a huge concern for low-income disabled people and people who provide unpaid care, who typically are trying to survive on their benefit entitlement – income which is not keeping up with inflation.''

An Ofgem spokesperson said: “Protecting consumers is our top priority and in 2020, we introduced important protections to support consumers at risk of self-disconnection. This includes a requirement on suppliers to identify prepayment meter customers who are self-disconnecting and to offer short-term support through emergency and friendly-hours credit.

“This is just one way Ofgem is helping vulnerable customers, including a range of robust market reviews to stamp out sharp and bad practice from suppliers, ensuring fair treatment for all consumers during these very difficult and turbulent times.”

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