29 Jul 2022 | Posted In Money advice news

The UK’s three largest debt charities have called on the energy regulator Ofgem to urgently increase protections for people with energy arrears, as rising costs continue to impact households.

Citizens Advice, the Money Advice Trust and StepChange Debt Charity are warning that with a further substantial rise in the energy price cap coming in October, more households will be unable to afford their energy bills. Whilst the charities have welcomed the government’s package of financial support, they fear that given the likely scale of the October price cap rise more people are at risk of self-rationing their energy use or self-disconnecting. This in turn puts at risk many people’s physical and mental health during the cold winter months.

The charities’ findings show that:

  • Energy arrears have exceeded council tax and are now the most common debt type amongst people contacting the Money Advice Trust’s National Debtline service and Citizens Advice.
  • In the first quarter of 2022, 32 percent of callers to National Debtline had energy arrears – up by ten percentage points since 2021.
  • The total number of people seeking energy debt advice from Citizens Advice in the first three months of 2022 was 64 percent higher than the same period in 2019.
  • The average level of energy arrears amongst callers to StepChange Debt Charity has risen by almost a third (32 percent) in the past two years from £1,056 in 2019 to £1,399 in 2021.

In a letter to the chair of Ofgem, the charities are urging the energy regulator to take action, by:

  • Publishing guidance to energy companies to ensure people who fall into arrears are treated fairly and are not asked to repay amounts they cannot afford.
  • Protecting customers in financial difficulty from potentially harmful debt collection practices.
  • Working with suppliers to keep prepay customers on supply this winter, including a temporary commitment to halt disconnections and forced installation of traditional prepayment meters for debt.

The full set of recommendations are outlined in the Charities’ ‘Rising energy prices: Protecting energy customers in debt’ briefing.

Joanna Elson CBE, chief executive of the Money Advice Trust, the charity that runs National Debtline and Business Debtline, said:

“Government support to help with energy and cost of living price rises is welcome, but the challenges facing many people are set to become more acute with another substantial increase in the energy price cap coming this autumn.

“At National Debtline and Business Debtline, we are hearing from more and more people struggling to afford soaring energy bills.

“As the Business, Energy and Industrial Strategy Committee rightly highlighted this week, Ofgem can, and should, do more to offer protection to households struggling with their energy bills. We are calling on the regulator to ramp up protections to ensure energy firms treat people struggling to pay or already in energy arrears fairly, including halting potentially harmful debt collection practices.

“We look forward to working with Ofgem to make these recommendations a reality as soon as possible.”

Phil Andrew, CEO of StepChange Debt Charity, said:

“The October price cap rise, coupled with the damaging effects of inflation, will have a disastrous impact on millions of households’ finances – the cost of living is now the most common reason for debt among new StepChange clients, something we expect to continue over the coming months. That’s why it’s essential that Ofgem, alongside Government and energy companies, does all it can to help people navigate this difficult period. We look forward to working closely with them to implement the recommendations we have outlined.”

Dame Clare Moriarty, CEO of Citizens Advice, said:

“Families we’re supporting are already facing stark choices because of mounting bills. Some are turning off fridges and freezers because they can’t afford the running costs; others are washing their kids’ clothes at their grandparents’ because they’re already in the red.

“Come October when energy prices are set to jump again, things will go from bad to much worse.

“The government needs to be ready to act again, but Ofgem has a crucial role to play. It must ensure suppliers aren’t chasing people for debts they can’t pay or forcing people onto prepayment meters when they’re struggling to cover their bills.”

Read the full briefing.