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Energy firms urged to offer prepay customers a ‘debt holiday’

24th December 2014 Print

Citizens Advice is calling on all energy companies to give prepayment customers a ‘debt holiday’ this winter.

New evidence finds prepay customers spend more than twice as much topping up their gas in winter compared to summer.

The national charity and consumer body predicts more people will seek help about fuel debt in the first three months of 2015.

New statistics comparing energy advice sought in January to March 2014 to the rest of 2013/14 finds:

a 66% increase in people seeking online help about problems paying fuel bills;

12% more fuel debt problems reported to Citizens Advice Bureaux;

10% rise in the number of people contacting the Citizens Advice consumer service about disconnection issues.

With prepayment meters often installed to recoup debts, a proportion of each top-up goes towards paying off arrears.  Delaying debt repayments until the weather warms up could prevent significant numbers of prepayment customers from rationing heat and hot water or cutting off their supply altogether.  

Analysis of Ofgem’s report on Domestic Suppliers' Social Obligation in 2013, published last week, reveals:

Around 300,000 new gas and 300,000 new electricity prepayment meters were installed during 2013, up 20% on 2012.

80% of new installations were for customers who had debts – 230,000 households.

At the end of 2013, the number of electricity and gas accounts with a customer repaying debt increased by 13% and 17% respectively, compared to the end of 2012.

Findings from a  Citizens Advice survey reveals prepay customers are more likely to spend £20 or more each week in winter on gas compared to less than £10 a week in summer.  It also finds 60% of people add £20 or more to their electricity meter in winter, compared to 29% of people in summer.

Pay as you go households have no way of spreading the cost of winter fuel bills.  Direct debit customers pay for their winter bills throughout the year and those who pay by quarterly bills get to pick up the cost later.

A debt holiday is not a new idea. Last year Scottish Power offered their prepay customers a debt holiday.  Citizens Advice has written to all suppliers asking them to offer prepayment customers a debt holiday.

Citizens Advice Chief Executive Gillian Guy said; “A debt holiday would be a Christmas bonus for prepay customers. It’s an expensive time of year; for people’s energy bills as well as the other festive costs.  Delaying payments for debts will mean those people struggling to afford heat and light don’t have to make severe cut-backs.

“Energy suppliers have a real opportunity to help prepay customers this winter and begin to rebuild customers’ trust.  Prepay customers can pay an average of £80 more a year on gas and electricity.  It’s important the prepay customers have a choice of tariff and that the industry modernises the pay as you go system by offering top ups over the phone, online and via text.”

Citizens Advice wants to see energy companies offer customers a more modern way to top up the meters. Most prepay customers can still only add put money on their meters by going to a local store – a task that can be made much more difficult in winter weather conditions.  Instead the charity would like all firms to give customers the chance to top up online, over the phone or by text, like prepay mobile phone customers.