Fuel Poverty Research Library
Methods of Paying for Fuel – A Good Practice Guide
Rationale
Low-income households are often placed at a disadvantage when paying for the energy they consume. Owing to limited or unstable income and debt, many cannot access the full range of payment methods suppliers offer to customers. Furthermore, they are often restricted to options such as prepayment meters, which charge more for fuel, compounding the effect of reduced choice.
Energy companies are required to issue codes of practice outlining their responsibilities when dealing with customers in financial difficulties and what payment choices are available to such customers. As part of this obligation, they must ensure that these codes are widely publicised.
Key research Question
To investigate the extent to which current codes of practice are fit for purpose and are being adhered to, to identify any good practice and to map the basic principles that should underlie suppliers’ best practice in this area with a view to informing better support for low-income households.
Summary of activity
NEA reviewed the codes of practice produced by domestic gas and electricity suppliers in the UK.
Methodologies
Findings
Payment methods and low-income consumers: Although the regulator advises suppliers to include end-of-year reconciliation of credits and debits in their codes of practice, no gas company complies with this, and neither do all electricity providers. In addition, the evidence suggests that electricity suppliers are failing to utilise the Fuel Direct payment method, although gas suppliers are obliged to offer it. Other methods of payment such as fuel stamps are being removed, despite the demand among low-income households, without clear evidence that suitable alternatives are being provided. In addition, not all electricity suppliers’ codes of practice state that prepayment meters are costlier, and, while most companies are adding to the number of locations where cards/keys can be topped up, not all companies are.
Payment methods and associated issues: Although guidance on Fuel Direct payment suggests a rate of recovery of £2.65 per week and the cessation of fixed-term repayment periods, the actual rates across electricity suppliers range from £2.11 to £5.19; fixed terms remain in place at some companies, and there are signs that companies may accelerate debt recovery. In addition, the majority of suppliers only offer the minimal level of protection required under the ‘special provision’ approach for older people; although the use of security deposits for customers with poor credit ratings is falling, there is still a variety of practices among those suppliers that apply them. Codes of practice are not explicit about obligations with regard to accurate meter readings; considerable variety exists among debt collection procedures, and not all suppliers explain their approach in their code of practice – when they do, the explanation can be opaque and complex. Finally, while most codes of practice do meet plain English standards, there is little evidence of provision for speakers of other languages or those with hearing or sight impairments.
Recommendations
A model code of practice is included in the report. Specific recommendations are attached to each section. These include:
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Payment methods and low-income consumers: Energy suppliers should promote Fuel Direct as an option for suitable customers. The regulator must assess the impact of phasing out existing payment methods (e.g. fuel stamps) on clients in financial hardship. The cost implications of prepayment meters should be made explicit in customer information, and the option to remove such a device should be provided. There should be no more than a mile between places to top up payment cards or ‘keys’, and particular groups, such as those with mobility issues or far from amenities, should be offered alternatives to prepayment meters. If a debt is paid, the alternative of a credit meter should be offered, as well as information on the full range of payment options.
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Payment methods and associated issues: Energy suppliers should ensure that they train their staff in money advice and counselling and/or involve specialist agencies. Such advice must be targeted at those customers most at risk, including those on Fuel Direct, using prepayment meters or paying arrears. Information on the use of security deposits must be clear up front. When dealing with a customer in debt, suppliers should consider all debtors as unable, rather than unwilling, to pay and base repayments on ability to pay. Debt recovery practices should be standardised across the industry and made clear in customer literature. Fuel Direct figures should be used to determine levels of recovery. Customers in debt should receive information on energy efficiency. If the current ‘special provision’ approach adopted by energy companies towards older and/or disabled people is shown to work, it should be extended to all households that contain older residents, children under 11 or members with long-term ill health or disability. Energy companies should not pursue privileged creditor status where a customer has multiple debts. Suppliers should assess how the needs of speakers of other languages or those with hearing or sight impairments can be met. Finally, external monitoring of the performance of suppliers in all these areas should be undertaken, and they should publish regular progress reports.
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