Written evidence submitted by 38 Degrees (WIN0018)
About 38 Degrees
38 Degrees is a community of a million people who - in a moment away from their busy days - take small actions on issues they care about, which all add up to something bigger, a movement for a better Britain for everyone who calls our country home. With on and offline campaigning technology, a creative and dedicated staff team and a people powered movement, we work to change lives, communities and our country, and by coming together we can have an impact far greater than any of us could achieve alone.
We are submitting evidence to share insights from our campaigning and research on the cost of living crisis, in particular the impact of high energy bills on customers last winter.
How should energy companies respond if customers cannot pay their bills and what actions should they not have recourse to?
There are several clear actions that would make a huge difference to the poorest and most vulnerable households as we approach another winter energy crisis - ensuring we don’t see another year of en-masse self-disconnections and unnecessary deaths due to sky-high bills:
1. Energy debts should be cleared for the most vulnerable customers.
2. No one should be forcibly transferred onto a prepayment meter.
3. Social tariffs should be introduced to support households in fuel poverty.
New Ofgem figures obtained by 38 Degrees via a Freedom of Information request reveal that prepayment meter debt now makes up almost half the total £2.25 billion UK customers owe to energy companies. These energy debt repayments are deducted from the credit on prepayment meters - meaning the worst-off customers watch the money they put on their meter ‘eaten up’ by debt, which can even leave them unable to power or heat their homes after topping up.
There was a staggering £1,026,223,558 in debt sitting on prepayment meters in the first quarter of 2023. This is a huge and rising burden of debt - which many may never be able to pay off. The prepayment meter debt burden has more than tripled in four years - up from £328m in 2019 - and now makes up a far larger proportion of overall debt. In 2019 just 27% of energy debt was held by prepayment customers - now it is 46%.
People fall into debt in two ways: by being switched onto prepayment with existing debts left to pay off, or because they’re already on a prepayment meter and have asked for emergency credit they must then pay back. Below are two real life stories of how each scenario can play out for struggling families.
Being switched onto a prepayment meter
Mum-of-three Melissa Perren, 42, who lives near Plymouth is just one person who has been hurt by a system that kicks you whilst you’re down. Melissa always paid her rent 'religiously' and was never behind on rent payments. But as a full-time carer for two disabled children, when the energy crisis hit, she struggled to pay energy bills of as much as £1,200 a month, racking up debt which was then transferred to a prepayment meter. Whilst suppliers have to work with customers who tell them they are struggling to pay off debts to come up with repayment plans, for families like Melissa’s, even these plans can mean the last of their available cash being put towards debt.
Melissa said: "At one point we were having to pay £10 a week off on the debt - I would put £10 on the meter and it would disappear onto the debt straightaway, leaving us with no credit. I couldn't afford to have the electricity on, I couldn't keep the house warm - but I still had to put money on the meter that we couldn't use for power. It's fair enough that you have to pay what you owe, but in our situation it felt like we could never pay it off.
"We were self-disconnecting almost every day, we'd be left without power overnight. Two of my children are disabled and it's bad for their health - last winter, my son ended up in hospital because his asthma got so bad with how cold and damp it was. People shouldn't have to live like that."
Asking for emergency credit whilst already on a prepayment meter
Bridget Chapman, a 53-year-old mental health therapist from Darlington is also experiencing the burden of prepayment debt. Bridget sees therapy clients from her home and needs to welcome them with a warm, well-lit environment, but with her clients struggling to afford regular therapy she's had to cut her own prices and has begun finding it hard to keep her meter topped up.
She recently had to ask for emergency credit for the first time - racking up a debt which she'll now have to pay off. She's agreed to repay £3 a week with her supplier. Bridget says that, whilst that may not sound like much to some people, for someone who was already struggling to keep the meter topped up, it's an extra cost she can hardly afford.
She said: "I had to ask for help. It was the first time I turned to the energy company to ask for help and now, every week, I have to put money onto the meter which goes straight onto the debt. As a mental health professional, I do have tools to manage my anxiety, but I know the emotional impact and stress a debt like this can have on many people. It's totally unfair that these energy companies can make such huge profits but can't help people who've turned to them for support in an emergency."
Even with the new price cap coming into effect in October, millions of people will still be struggling with debt built up due to the last few years’ unaffordable bills - and trying to pay it off at last year’s prices. It is therefore essential for energy debts to be cleared for the most vulnerable customers, no one be forced onto a prepayment meter, and social tariffs be introduced for households in fuel poverty. Indeed, more than 45,000 people have signed a 38 Degrees petition calling on the Government to help families with the burden of energy debt before next winter.