NEW ERA Debt and Disconnection Position Paper available to download!

Key Facts

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 Failure to pay would, of course, mean that the right to have access to that service would be withdrawn.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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• 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
Money Advice Trust
National Energy Action