Conclusions and recommendations
Identity of those disconnected
1. We
do not believe that the statistical information is as yet either
comprehensive or detailed enough to state that a specific percentage
of those disconnected fall into fuel debt for this or that reason.
However, clearly there are various reasons why customers incur
debt and, although some may be unwilling to pay, others cannot
afford to do so, or (for whatever reason) find it difficult to
budget for bills, or have been presented with inaccurate bills
by their suppliers. More could be done by suppliers to prevent
and to limit the build up of debt. (Paragraph 14)
Disconnections in error
2. No
hard information about the true scale of the problem is available,
still less can we draw any statistical conclusions about the types
of error that lead to disconnection. Although Energywatch's analysis
(which was based on 239 customers who complained that they had
been disconnected in error) cannot reliably be used to extrapolate
statistics, it is useful in indicating the types of problem that
arise. (Paragraph 23)
3. Companies still
make too many errors such as wrongly recorded names or addresses
of customers, or—most frequently—inaccurate meter
readings. Even if, as the ERA suggests, such mistakes affect a
small proportion of the millions of bills that are sent out each
year by energy suppliers, this would still mean a significant
number of customers. Errors cannot be eliminated completely from
any system, but the supply companies should make greater efforts
to minimise their number, and should put in place robust arrangements
for correcting mistakes quickly once they have been detected.
(Paragraph 24)
Debt advice
4. The
debt counselling and trust fund schemes put in place by a number
of energy companies are useful and welcome. However, not all companies
are doing enough. We do not wish to be prescriptive about exactly
how companies achieve this, but we believe that all should give
advice on managing debt, and that Ofgem should report on their
compliance with best practice in this regard. (Paragraph 28)
5. We consider that
all supply companies should be required to provide a benefits
health check as a standard part of their fuel poverty programmes.
(Paragraph 30)
Use of Pre-payment meters ('PPMs')
6. We
recognise that it is more difficult and time-consuming to fit
a PPM for gas supply than for electricity supply, but we are not
convinced that gas supply companies are making enough efforts
to fit such meters. This may be in part because of the widely-acknowledged
shortage of qualified gas engineers, who have to carry out the
process. Whatever the reason for the present situation, it leaves
gas supply companies vulnerable to the accusation that they prefer
disconnection as a cheap and easy alternative to fitting PPMs.
To rebut this argument, they need to prove that they are making
more efforts to fit a PPM wherever such a payment method is appropriate
for the customer. (Paragraph 36)
7. Energy supply companies
have suggested in the past that they are not permitted to cross-subsidise
the administrative costs associated with PPMs from other customers.
We are therefore pleased to note that Ofgem has recently published
a paper not only suggesting that it sees no competition problem
in such cross-subsidy but also encouraging it. (Paragraph 39)
Use of Fuel Direct
8. Fuel
Direct would not be suitable for every customer on benefits who
owes money to energy companies. However, we agree with National
Energy Action that it "could develop into an acceptable tariff
option rather than [as at present] a virtually moribund payment
method of last resort." To achieve this, eligibility for
the scheme should be extended to a wider range of benefits; the
thrust of the scheme should be to enable customers to prevent
the accumulation of debt rather than just to repay it when they
are on the brink of disconnection; and the administration of the
scheme must be automated and made consistent throughout the country
so that the energy companies are not deterred from using it by
its difficulty, complexity and expense. The DWP has, it appears,
argued for years that what it was waiting for was automated payment
of benefits. The soon-to-be-completed move to ACT provides an
opportunity to revive Fuel Direct. We would like now to see an
account from the Government of how Fuel Direct is to be improved,
and a timetable for its implementation. (Paragraph 44)
Contacting customers in debt
9. It
is not clear to us how many of the supply companies at present
have implemented procedures for attempting to contact customers
and sort out their non-payment problems, nor can we be sure of
the extent to which best practice has been adopted in the industry.
We therefore ask Ofgem to assure us that all supply companies
have committed themselves to such a process. (Paragraph 46)
10. On the question
of actual implementation of proper procedures, we are pleased
to record Ofgem's statement that it could and would impose financial
penalties on companies that were not implementing debt-handling
procedures properly. (Paragraph 47)
11. Ofgem's quarterly
reports on progress in its Social Action Plan provide a useful
mechanism for keeping up the pressure on companies to follow their
procedures. We urge any advisory bodies and charities involved
in supporting customers in fuel debt—including Members of
Parliament—to report to Energywatch any clear examples of
failure by companies to follow adequate debt-repayment procedures;
and Energywatch must notify Ofgem of any companies with poor records.
(Paragraph 47)
Priority Services Register
12. In
its September paper, the Energy Retail Association suggested a
number of ways in which the Government could help to publicise
the Priority Services Register. It proposed that health workers
and providers of social services encourage those eligible to register;
that information could be targeted at families on child benefit,
and that leaflets on the PSR could be made available in benefit
offices, doctors' surgeries, schools, and the offices of housing
associations and local authorities. All of these suggestions seem
sensible. We ask the Government to inform us which are being taken
up. (Paragraph 51)
Applications for warrant to disconnect supplies
13. Some
of our witnesses expressed doubts about whether the energy companies
had exhausted all other procedures before applying to magistrates
for a warrant to disconnect. If the companies' processes are as
thorough and robust as they claim, then there should be little
difficulty in relatively senior company officials' satisfying
themselves that proper procedures have been followed in full,
and signing a document to confirm this. The document would then
be presented to the magistrates when the company applies for a
warrant to disconnect. We ask Ofgem to inform us what progress
has been made in pursuing this proposal. (Paragraph 54)
Protecting vulnerable customers
14. The
rewording of the definition of vulnerability to make it clear
that it extends to members of a customer's household meets the
most frequently-voiced concern of our witnesses and of the respondents
to the Energy Retail Association's consultation paper. However,
it is not clear that even this definition would apply to many
of those whose energy supplies are disconnected for debt at present.
(Paragraph 61)
15. It is impossible
to judge whether the staff of energy supply companies will be
able to identify most vulnerable customers and subsequently prevent
the disconnection of their fuel supplies. The proof will lie in
the disconnection figures. Because of the length of the disconnection
process, Ofgem's quarterly reports do not yet show the effects,
if any, of these initiatives. We expect Ofgem to keep the situation
under close review, and we recommend our successors to return
to this issue. (Paragraph 64)
16. It is absurd that
companies should spend time and effort in identifying vulnerable
customers in order to safeguard them only for this protection
to be lost if the customers change supplier. We believe that the
companies should, as a matter of urgency, seek clarification from
the Information Commissioner about whether the Data Protection
Act prevents the transfer of this information. We hope that the
Information Commissioner will be able to permit it, with safeguards
against use of the data for other purposes. The comfort of customer
confidentiality is of little consolation if the members of the
household are freezing to death. (Paragraph 66)
17. We were told that
a further problem with transferring such information was incompatibility
between the supply companies' electronic data management systems.
However, difficulties with transferring data on switching of supplier
do not end with the flagging up of vulnerable customers: many
of the problems with billing errors that lead to the threatened
or actual disconnection of supply occur when customers switch
suppliers. Sorting out incompatibilities between electronic systems
must form a major part of the effort to tackle the failures in
the customer transfer process. Despite the expense, we believe
that Ofgem should press the companies to deal with these problems
expeditiously. (Paragraph 67)
18. While the ERA's
latest proposals have reduced the burden which the earlier ones
appeared to place on local social services offices, this has merely
confirmed that the onus is on the companies themselves to identify,
advise and support vulnerable customers. We are not convinced
that they will be able to provide a complete safety net. However,
they must try. (Paragraph 75)
Ban on disconnections
19. As
the debates last year on the Energy Bill revealed, the Government
accepts the supply companies' arguments that a ban on disconnection
would lead to a significant rise in fuel debt. However, we endorse
Ofgem's warning: if these companies are to be allowed to retain
the right to disconnect supplies to customers on the grounds of
debt, then they must clearly demonstrate that they have taken
all practicable measures to resolve the problem earlier. They
must provide more support and advice to customers in financial
difficulties, particularly those in vulnerable groups, and, for
gas companies, they must make much greater effort to install PPMs
to avoid the need for disconnection. Moreover, they must reduce
the number of billing errors, particularly in connection with
the customer transfer process. Unless the industry demonstrates
a serious commitment to and success in addressing these problems,
we would recommend the Government to legislate to ban disconnections
of domestic fuel supply. (Paragraph 79)
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