Energy companies must show corporate responsibility for low-income consumers

Energy companies must ensure they maximise the value of financial assistance while removing barriers to claiming, says Policy & Research Officer, Joel Davies

Over the last three years people in Wales have faced record gas and electricity prices. To reduce the burden on those least able to afford it, Ofgem (the industry regulator) has worked to bring in and enforce various significant reforms. The introduction of a price cap in 2019, initially targeted at removing the ability for energy companies to impose ever-increasing prices on loyal customers, has been essential in protecting people from the shocks of the energy crisis, while permanent ‘levelisation’ of bills from April 2024 for those on prepayment meters to remove the financial advantage of being on a direct debit was a welcome—if overdue—step forward.

However, there is clearly still much work to be done to protect domestic energy customers from fuel poverty. 45% of households in Wales are estimated to be experiencing fuel poverty, including almost all low-income households. While retail energy suppliers cannot be expected to solve the energy crisis on their own, there have long been questions about whether they could be doing more. Most suppliers have a package of ‘extra care’ measures to support those struggling with bills, but is not clear whether they are sufficiently generous or efficient in delivery. We are in the early stages of our own review into the support on offer from retail suppliers—here we lay out some of our initial thoughts and findings. 

Good intentions must be followed with effective administration 

Take a look through the websites and annual reports of retail energy companies and you will find much is written both about their understanding of the hardship many of their customers are facing, as well as the generosity of their support offerings. It is undoubtedly true that these companies put in place packages of support that are in excess of the legal minimum; hundreds of millions of pounds have been set aside in trusts and funds to support those struggling to afford bill payments. There are various ways in which this money is apportioned. While some suppliers offer ‘freebies’ such as heated blankets and energy-saving devices, and boiler repair or replacement, the lion’s share is undoubtedly put towards grants to reduce debt or debt forgiveness.  

While the help is clearly to be welcomed, beyond the glossy reporting we already know that energy companies are not doing enough to support customers in certain areas, and the technical apportioning of money is only one of many steps necessary in fulfilling their responsibilities. Ofgem has repeatedly found reason to chide and fine suppliers for failing in their duties to their customers, with the bulk of the stress inevitably landing on those on low incomes. In May last year £2.7m was awarded in compensation to customers who had been overcharged by two companies—a result of inadequate systems. At the height of the energy crisis, suppliers’ approach to debt was found to be often wildly inappropriate, leading to a total ban on the involuntary installation of prepayment meters in 2023 (now being lifted). As of the beginning of April 2024, suppliers had paid out £342,450 to those affected. The financial redress will obviously be gladly received, but for those on low-incomes these mistakes are likely to have placed severe stress on household finances, potentially pushing them into a spiral of negative budgets from which it will be difficult to escape. 

Our initial survey of energy support schemes has revealed some weaknesses in the way that suppliers advertise and deliver the financial help they have made available. This includes directing customers to separate websites of their charitable trusts, or third-party companies contracted to administer the schemes. In describing support to potential customers, ‘charity’, ‘hardship’, ‘eligibility criteria’ are terms which are often used. Assuming this is unintentional, the risk is that circuitous introductions immediately put barriers in the way of people claiming or give an unnecessary impression of complexity. In our work on Welsh benefits, we have often called for support to be as streamlined as possible, and the same principle should apply here.  

Poor customer service may also be limiting the take-up of support schemes. Ofgem and Which? have separately published research this year that reveals significant levels of customer dissatisfaction with energy suppliers. Specific concerns which have emerged include difficulties getting in contact with suppliers, with significant proportions of surveyed customers even reporting that they received no contact from suppliers when they fell behind on bills or ran out of meter credit. One customer interviewed by Which? said that she felt call centre staff ‘lacked empathy’.  

According to Ofgem’s rules, it is beholden on suppliers to identify customers in financial distress in a timely manner and quickly offer an affordable repayment plan to those in debt. It appears that suppliers are not implementing the service needed to achieve this, given that a record 1.8 million accounts are in arrears with no repayment plan in place at the last report, and with the total value of that debt on a steady increase.  

While energy companies are expected to return to profit in the short term given the drop in wholesale prices, many of their customers will have been left reeling from price shocks and pushed into a cycle of negative budgets. The imperative for energy companies to act responsibly has thus never been greater; as customers have shared the pain, so they should receive the benefit of any gains. After the recent reduction in the price cap, bills are still 50% higher (an average of £400) than they were in the summer of 2021.  While apportioning by suppliers of money for support schemes is to be commended, if there are unnecessary barriers to its delivery to those in need then progress on fuel poverty will continue to be impeded.