23 Sep 2012

Switch option for struggling energy customers

Tens of thousands of struggling households who owe money to their energy supplier can switch to cheaper deals as part of a raft of new measures, the energy regulator announces.

The biggest six energy suppliers – British Gas, EDF, Eon, SSE, Scottish Power and npower – will allow customers on prepayment meters with debts of up to £500 to switch from November 1 in a bid to help them cope with utility prices which have jumped sharply in recent years.

Currently, only customers with debts of £200 or less are allowed to switch.

There are some 320,000 gas and 315,000 electricity customers with prepayment meters who owe money to their supplier, according to energy regulator Ofgem, and it is thought tens of thousands will be helped by the move.

In most cases they racked up the debts when they were allowed credit and were slapped with prepayment meters as part of a repayment plan.

The increase in the threshold at which customers can switch will be backed by a drive from suppliers to raise awareness of switching and making it easier to switch.

Allowing consumers to switch should help them repay their debts more easily.

Resolve debt issues

The latest initiative is part of Ofgem’s push to encourage suppliers to work more effectively with households to resolve debt issues and use disconnection as a last resort.

Ofgem is due to report figures next week that will show a 59 per cent fall in the number of people disconnected from their gas supply and a 54 per cent drop in electricity disconnections, partly as a result of people being given more time to repay debts.

However, the average amount of debt people are repaying on their gas accounts rose to £371 in 2011, up from £339 the previous year.

Meanwhile, the average electricity debt fell slightly to £357.

Sarah Harrison, senior partner for sustainable development at Ofgem, said: “We are acutely aware of the increasing financial pressures faced by many consumers, particularly those who are in the most vulnerable circumstances.

“We welcome the significant falls in the number of households being disconnected, but Ofgem remains determined to ensure suppliers continue to focus on helping consumers manage their energy bills and reduce their debt.

“That’s why we are pleased to announce a commitment from major suppliers which will permit tens of thousands more prepayment meter consumers in debt to choose the cheapest energy deal.”