Vulnerable customers to get extra winter fuel bill help
Extra protections to be introduced for customers struggling with winter energy bills, though energy prices are set to rise in the new year.
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Energy market regulator Ofgem has announced new protections for customers struggling to pay their energy bills this winter as the second wave of the Covid-19 pandemic hits.
From 15 December, energy suppliers will be required to provide more support by offering emergency credit for prepay customers and ‘realistic and sustainable’ repayment plans for those who fall into debt on credit meters.
The announcements come not long after Ofgem announced its energy price cap would drop to £1,042 a year, the lowest level since the price limit was first introduced, in January 2019.
Ofgem says the new regulations will provide households extra “breathing space” this winter to help families fend off the risk of fuel poverty.
What are the new protections?
The new Ofgem protections aim to prevent customers from being left in the dark or cold amid the economic impact of the coronavirus pandemic. Unions and charities have recently expressed concern that more households could find themselves in debt due to job losses and higher gas and electricity costs from home working.
While similar, voluntary measures were agreed between Ofgem, the government and energy providers as the UK first entered lockdown in March, the new regulation will become mandatory as part of supplier licence conditions.
Extra help for prepayment customers
Energy suppliers will now be required to offer emergency credit to customers who struggle to top up their prepayment meter. Prepay energy customers are usually among the most vulnerable and may not be able to afford to top up given the current situation, or are unable to get to the shop due to a disability, mobility issue or the need to self-isolate.
Energy providers will also be expected to offer extra prepayment credit to such customers to allow more time to work out an alternative arrangement to pay.[block:energy_tariffs_content2]
Sustainable repayment plans
Ofgem will also introduce regulations requiring energy suppliers to offer ‘sustainable and realistic’ repayment plans to customers who fall into debt on credit meters.
Suppliers will now be obliged to introduce appropriate credit management policies and set repayment rates based on the customer’s ability to pay. While many energy providers already have similar measures in place, Ofgem is now making this a licence requirement.
Energy price cap set to rise again
While the new measures are set to help out customers in positions of financial hardship in the short term, wholesale energy prices are actually set to increase over the coming months, as the economy begins to recover. This, in turn, will see Ofgem’s price cap rise once again, meaning gas and electricity suppliers will be able to increase their costs for customers on variable prepayment plans.
While prepayment may be a convenient option for those who like to budget or simply prefer to pay for their energy usage in advance, this type of tariffs represents the worst unit rates and standing charges Ofgem is willing to tolerate across the industry. For this reason, here at Selectra we always recommend switching from prepayment to a Direct Debit plan on a credit meter, where possible.
What does Ofgem say about the new measures?
Announcing the new measures, Ofgem’s Director of Retail, Philippa Pickford, said: “Many people will face a tough winter, especially those in financial hardship, as many people spend more time at home and energy bills go up.
“These extra protections are in addition to the support already available to customers. For example, suppliers and network operators maintain a Priority Services Register (PSR) of customers in vulnerable situations and provide extra help to those on the register free of charge. Currently, there are around six million customers registered, who receive a range of help from advance notice of planned power cuts to priority support in an emergency.
“Ofgem sets the price cap which ensures those on defaults deals and prepayment meters - about half the population - pay a fair price for their energy. On October 1, Ofgem cut the cap by £84 to £1,042 a year until the end of March following a drop in wholesale energy prices after the outbreak of the pandemic, which means significant savings for millions of households this winter.
“Wholesale energy prices have started to recover in recent months and, if this trend continues, the cap would rise again in April. Although those protected by the cap always pay a fair price for their energy, they could get a cheaper deal by shopping around and save a household hundreds of pounds a year.”
Further help with winter energy bills
If you’re struggling to cover your winter energy bills, you may qualify for a number of government energy grants and schemes, such as the Warm Home Discount, Winter Fuel Payment, Green Homes Grant and Cold Weather Payment. To find out if your energy provider participates in any of these programmes or to switch to a supplier that does, speak to an energy expert today on 020 3936 0059 or get a free callback now.