
NEW ERA Debt and Disconnection Position Paper available to download!
Key Facts
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ERA set up a
Safety
Net procedure in 2004
which ensures that no vulnerable customer
in Great Britain is disconnected from
their electricity or gas supply –
at any time of the year
The procedure
has been successful as no vulnerable
customer has been disconnected since it was put in place in 2004.
Disconnection rates have fallen from 17,000 in 2003 to about 5,000 in 2006.
Since 2003 the number of people in debt has remained stable at 1.2 million households, but the amount of debt has increased to an average of £225.
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ERA Position
The ERA set up a Safety Net procedure in
2004 to make sure that no vulnerable customer
in Britain is disconnected from their electricity
or gas supply. We have kept to our word
and we aim to maintain this level of rigorous
procedure.
Disconnection is a measure that is used
as a last resort, most often when a customer
has refused to accept a prepayment meter.
All energy suppliers go to great lengths
to avoid disconnections. Whilst a sensitive
issue, it is imperative that emotion is
removed from the debate and that the facts
are considered. The ERA believes that there
is a place for the sanction of disconnection.
The industry must retain its right to disconnect
customers who have the means to pay, but
put energy bills low on their list of priorities.
Disconnection is neither in the interest
of customers or energy suppliers, which
is why suppliers do not disconnect before
every effort is made to contact the customer
to allow them to continue their supply.
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Background Information
Identifying those who cannot pay vs. those who will not pay
There are two distinct elements
to this issue and they often become intertwined.
The first is disconnection, which refers
to the withdrawal of gas or electricity
supplies if a customer refuses to pay (i.e.
removing a right to energy supply to prevent
it being further abused). The second is
preventing vulnerable people from being
disconnected as a result of financial hardship
in paying energy bills.
Like other utilities, energy customers
pay for a product that is immediately used
and the retailer cannot demand its return
if it is not paid for. In other retail sectors
(e.g. food, clothing, electronics), the
customer is expected to pay before taking
ownership of the goods they desire. Failure
to pay would, of course, mean that the right
to have access to that service would be
withdrawn. As with any retail business,
energy suppliers maintain a right to restrict
access to services for those people who
refuse to pay their fuel bills and suppliers
will make every effort to recover the money.
Thus, it is important to differentiate between
those customers who cannot pay,
and those who will not pay.
However, with rising prices, higher taxes
and increased debt levels, it is unfair
that poorer people are having to subsidise
those who can afford to pay, but choose
not to. Such people are taking advantage
of the fact that energy is paid for after
it is consumed and is not retrievable.
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Steps to Preventing
Disconnection
All energy suppliers seek to avoid disconnections
at all cost and it is used as an absolute
last resort after a customer has received,
on average:
• Eight attempts to contact through
correspondence
• Two attempts to contact by telephone
• Two attempts to contact by personal
visit to property
• One attempt to contact by visit
to court, and
• A final attempt to contact before
a warrant is executed
In 2005, Ofgem’s figures revealed
that between 0.01% and 0.03% of electricity
customers and 0.1% of gas customers are
disconnected each year and this figure is
reducing. In the majority of cases, customers
agree repayment methods, have a pre-payment
meter fitted or qualify for benefits through
the Fuel Direct scheme before such procedures
are initiated.
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What are others
saying?
"Disconnections are down significantly from the record levels seen in 2001. It is reassuring to see supplier's progress in improving debt and disconnection procedures overall since Ofgem's last industry-wide reciew in 2005."
Alistair Buchanan, Chief Executive Ofgem, January 2008
“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.”
House of Commons Trade and Industry
Select Committee Report – ‘Debt
and Disconnection: Gas and electricity supply
companies and their domestic customers’,
February 2005
The industry delivered its own solution
to the issue, by developing an agreed safety
net arrangement for vulnerable customers
– effectively ensuring no disconnections
of customers in that category.”
Alistair Buchanan, CEO Ofgem, November
2005
“I particularly welcome the document
[Preventing Vulnerable Customers from Disconnection]
as Mr and Mrs Bates were residents in Wandsworth.
I am very supportive of the approach you
are taking – it is balanced and sensible.”
Director of Social Services, Wandsworth
Council, November 2004
“I am very pleased that energy companies
have now been put on final warning to tighten
up their disconnection processes or face
a total ban on disconnections. Disconnections
are a serious issue particularly those of
vulnerable consumers and those carried out
in error. Our own research has shown that
30% of disconnections occur where the poorest
13% of the population live and that the
300,000 or so households in Cardiff, are
one and a half times more likely to be disconnected
which is above the national average and
quite unacceptable. ”
Bob Wilkinson, Chair of energywatch
Wales, February 2005
“NEA advocates a legal ban on disconnection
from domestic supply and feels that such
a ban is the only way to prevent tragedies
such as that of Mr and Mrs Bates which sparked
this [Trade and Industry Select Committee]
inquiry. In the meantime we will be scrutinising
the working of new company practices to
assess how effective they are in protecting
low-income households and other disadvantaged
consumers.”
William Gillis, CEO National Energy
Action, Feb 2005
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Useful
Links
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Advice Trust
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