Written evidence submitted by Fuel Bank Foundation (WIN0051)

 

Fuel Bank Foundation is a charity that supports people who struggle to prepay for their energy. Since our inception eight years ago, we have now supported over a million people; 400,000 of whom we have helped in the last 12 months. We work with a 650-strong network of partners who validate on our behalf that households have run out of credit on their prepayment meters or will do very soon.  

 

Here are our responses to the Committee's questions in its "Preparing for the winter" inquiry. 

  1. What role did the UK grid play in the high domestic prices of winter 2022-23? 

This area is outside the expertise of Fuel Bank Foundation. 

  1. What more could have been done to prevent price shocks being passed to consumer bills?

We have long argued that the Government should be funding an ambitious national energy efficiency programme. Investing in energy-efficient measures can help reduce energy consumption and deliver lower bills for households. If the UK housing stock had been more energy efficient when wholesale prices rose, consumers would have needed to use fewer units of energy to keep their homes warm and, as a result, experienced lower energy bills.

 

In addition, the Government should have invested in more renewable generation and storage facilities to reduce the UK's vulnerability to price shocks when supplies from other countries tighten.

 

We are aware that the combination of the Energy Price Guarantee and the Energy Bill Support Scheme (EBSS) have added many billions of pounds to the UK's public borrowing. Despite these welcome interventions to shield customers from the full impact of the huge increase in wholesale energy prices following the Russian invasion of Ukraine, low-income households still struggled to pay prices that were at an historic high. Many of them came to the Fuel Bank Foundation for crisis support, as evidenced by the increase in demand for our services - we saw an 86% increase in the period 1 April to 30 July 2023 over the same timeframe in 2022. 

 

Although we appreciate that many UK households were concerned about how they would cope with paying spiralling energy bills last winter, we think that the Government support should have been targeted at those households who particularly struggle to keep warm (such as the disabled, low-income, homes with higher heating costs) rather than being given to all, as this is where the greatest impact of the subsidies would have been felt. 

 

We understand that speed was of the essence in terms of devising a scheme to get support to people last winter. However, this meant that the Government's approach was to give the same amount to everybody, regardless of their income, the energy efficiency of their home or even their geographical location in the UK. Although the typical bill was capped at £2500, this did not mean that this was the maximum people paid to keep warm, with some people paying much more.

 

Given that the average price of oil for home heating in the UK doubled last winter, those living off the gas grid were even more disadvantaged, despite the £200 Alternative Fuels Payment that they received in addition to their EBSS payment. 

 

As a charity, we received over a million pounds in donations from the public last year - very many of whom told us that they had no need of their EBSS payment and wanted us to use it to support other households instead.   

 

Finally, there was a flaw in the design of the EBSS scheme. People with traditional prepayment meters were supposed to be sent vouchers which sometimes didn't arrive at all or, for whatever reason, were not redeemed by the very households who, arguably needed the support the most. Before Christmas (when, as a charity, we were spending £0.5m a week to keep people warm) 1 in 5 clients were telling us that they didn't think that they'd received their EBSS payments. This is why information campaigns by the Government itself and charities like ours were then kicked off. 

 

A scheme to support people who don't have a relationship with an electricity supplier (for example, those living on canal boats) wasn't even announced until December, when winter was well underway. 

 

A learning point for the future is that crisis help should be delivered just before it's needed. So, oil customers should have received the support in October and prepayment meter customers should have had payments which reflected the fact that their monthly costs fluctuate according to the temperature. For them, heating costs in March are usually very different from December, but they were given equal monthly payments of £66.   

  1. How should energy companies respond if customers cannot pay their bills and what actions should they not have recourse to?

Suppliers should treat every case on its own merits as one size most definitely does not fit all in these circumstances. Each customer's situation should be assessed individually so that tailored solutions can be offered.  For example, if the household has someone vulnerable in it this should clearly be taken into account when deciding on next steps. Suppliers should always encourage their customers to disclose early on any difficulties that they may be having in paying their bills and respond empathetically when they do.  If the customer has engaged with the supplier to repay their debt, then an affordable payment arrangement should always be the optimum solution. Once they are having a constructive conversation with the customer, suppliers should use the opportunity to provide them with energy efficiency advice, offer to add them to the Priority Service Register if applicable, connect them with other forms of support or advice and generally empower them to take steps to manage their energy bills in future. 

 

However, suppliers also need to become more proactive in reaching out to, and supporting, their most vulnerable customers. For various reasons (previous experience of poor customer service, low confidence levels and anxiety, for example) they may be reluctant to contact their supplier to ask for help. Suppliers should be checking with their prepayment meter customers, in particular, that they can afford to top up sufficiently and that the payment method is still appropriate for them.

We know that many customers love their prepayment meter(s) as it gives them control but, in the wrong financial circumstances, it can present serious risk.

 

We recognise that suppliers clearly need to be able to recover debt from individual customers. If they can't, those losses will be smeared across all customers, including those who are already struggling to afford their energy bills and can least manage to pay a further increase. So, we believe that they should, ultimately, be able to fit a prepayment meter against the wishes of the customer if they are refusing to cooperate with them to repay their debt. However, this should only ever be done as a last resort after all other avenues have been exhausted and where the supplier has demonstrated empathy and a genuine willingness to reach a solution that reflects the customer's ability to pay.

 

Disconnection should only be carried out for safety reasons or where theft of energy has taken place. Even in these scenarios, reconnection should happen as soon as possible, and additional safeguards should be put in place if vulnerable people are living in the household.

 

We are very clear that suppliers are not funded to provide continuous energy to those who can't afford it and / or do not pay for what they have consumed. Obliging suppliers to do this will simply pass increased costs through to consumers, including those who are already struggling with energy prices.    

 

We think as part of its enquiry, the Committee should also consider the role of suppliers in supporting Prepayment Meter customers. These customers do not pay bills as such but may also struggle to afford energy. In these instances, they will find themselves immediately without heat and light (unlike credit customers who will not lose their energy instantly, even if they are struggling to pay their bills).

  1. Has Ofgem got its priorities right in addressing customer protection?

We very much support the work that Ofgem is currently undertaking around involuntary installation of prepayment meters and driving improved customer service, especially for vulnerable customers. However, we think that they have been too slow to take any action to identify, and mitigate, any risk to consumers in both these areas. 

 

Fuel Bank Foundation wrote to suppliers in 2021 to suggest ways in which they could improve their customer service for prepayment customers, based on the detriment we were seeing back then. 57% of our clients tell us that they have found their supplier to be very or fairly unhelpful when they contacted them to ask for support. In addition, we wrote to Ofgem in September 2022 to express our concerns that suppliers were not complying with their Licence Obligations in a number of areas, including their duty to ensure that a prepayment meter is "safe and reasonably practicable" before installing it. This was based on insight derived from our own research which had found that 41% of the people we supported had a critical need for energy and yet were struggling to afford to keep their prepayment meter topped up, so regularly going without heat and power.  No changes were made, and no enforcement action was taken, however, until The Times newspaper's investigation into British Gas's force-fitting of prepayment meters in February 2023. At this point, a voluntary Code of Practice was agreed with suppliers and various workstreams were launched and consultations issued. We understand that Ofgem may have been operating under resource constraints, but this could, and should, have happened much sooner. In fact, as energy prices increased (and energy costs took up an even larger portion of household budgets) it was essential that Ofgem re-doubled its monitoring activities.   

 

We note Ofgem's support for a Social Tariff to provide additional help to low-income households and hope that it will continue to make the case to Government that this is needed and long overdue. 

 

  1. How effective is the Government's approach towards supporting the sector and delivering a functioning energy market?

 

In the past, the Government has often taken an "anti-large supplier" stance which one could argue is counter-productive when they are relied on to deliver the roll-out of smart meters and energy efficiency programmes and play a key role in the UK's transition to net zero. These require consumers to have high levels of trust in suppliers if they are to engage with them. We note that this narrative has softened in recent years, but it's possible that the damage has already been done.

 

The Government's relentless focus on a competitive market with multiple suppliers meant that some players were able to enter the marker who, arguably, shouldn't have been able to as they didn't have the necessary financial resilience to withstand rising wholesale costs. The huge costs of these multiple failures were then passed on to all customers (including low-income customers) through increased Standing Charges.  

 

7. Is the legislative framework on pricing controls suitable for protecting consumers?

 

The legislative framework on pricing controls protects consumers from extreme price volatility, ensures that prices reflect the cost of energy and prevents excessive profits being made by unscrupulous suppliers. However, the fact that prices are fair does not mean that they are affordable for all. 

 

August 2023

 

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