London, U.K. — (METERING.COM) — July 19, 2007 – Energy debt in the U.K. is increasing, according to uSwitch.com, a free, impartial online and telephone-based comparison and switching service. uSwitch was commenting on a recent report from regulator Ofgem revealing that the average amount of money owed by consumers to energy companies has gone up by 33%, from £150 ($300) in 2004 to just under £200 ($400) in 2006. The majority of customers in energy debt owe less than £100 ($200), but 21% owe between £100 and £300 ($200 and $600), while 8% are in the red by more than £600 ($1200).
These figures are, however, believed to be the tip of an iceberg, as they do not take into account the number of consumers in energy debt who do not have a debt repayment program set up. The report is also based on numbers at the end of 2006 before winter fuel bills had hit doormats, energy price decreases had come into effect, and before three successive base rate increases saw a greater squeeze on homeowners.
The official statistics also suggest that a financial health warning should be slapped on prepayment meters (PPMs). There were 5.8 million PPM customers at the end of 2006 compared with 4.7 million in 1997, a 23% increase, and the rate at which PPMs are being installed to recover debt is at a five year high.
Overall, 39% of customers in debt – 780,000 – are on a PPM. But worryingly, last year 169,159 PPMs were installed upon request by customers who were not in debt. While it could be argued that a PPM will help them to monitor their energy usage, for many this will come at a cost. The average PPM customer will pay £56 ($112) more than a customer paying upon receipt of bill and £128 ($156) more than a direct debit customer. So those who have installed one as a budgeting tool are in fact in danger of damaging their budget instead.
More importantly, being on a PPM can put vulnerable customers at risk of actually being pushed into debt by their supplier because of back charging. 100% of gas customers are on smartcard meters, which are automatically updated in the event of a change in pricing. However, in electricity there are still around 30% of PPM customers using token meters. Token meters are old technology and all suppliers have a license obligation to replace these meters with ‘smart’ ones that do not require visits to be recalibrated, as the price can be re-set remotely. Following concerns about the level of debt build-up resulting from delayed recalibration in March this year, 130 MPs slammed three energy suppliers – ScottishPower, Powergen and npower – for back charging 700,000 PPM customers.
The report also reveals that customers in debt are being denied a helping hand from suppliers in the form of energy efficiency information. Only 6.9% of the total number of customers in debt were given information by their provider in 2006 that could help them take steps to reduce their energy consumption and therefore their bill.
Ann Robinson, Consumer Policy Director at uSwitch.com, says: “There is an alarming propensity for energy providers to push customers in debt onto prepayment meters – this is a cop-out as it is often their own poor billing and debt management practices that force consumers into debt in the first place. Rather than getting their own house in order and tackling the root causes of the energy debt, providers peddle PPMs which should carry a financial health warning. This is even more worrying when coupled with the fact that consumers in energy debt are not being given basic energy efficiency information that would allow them to take greater control and reduce their bills.
“The key for all consumers is to ensure that they are paying the lowest possible prices for their energy. Unfortunately, there is a real danger that those on prepayment meters feel excluded from the benefits of switching and competition. Ofgem is currently running a campaign urging them to start taking part in the market because they have got so much to gain from doing so. This is absolutely the right stance to take. On average customers could save £210 ($420) by switching from their suppliers to the cheapest available dual fuel plan.”