Spenny energy
With Cozzy Livvy being adopted by Gen-Z as a moniker for the cost of living crisis, I was tempted to call this blog ‘Spenny Enny’ but in acknowledgement no one would know what that meant, I’ve gone for a hybrid. (For anyone still unable to decipher the word ‘spenny’, it’s slang for expensive… and before you’ve even started the blog, you’ve learnt something new. You’re welcome.)
Winter is coming
The leaves are turning, we’ve had our first frost up here in Manchester and as temperatures start to drop, everyone’s starting to consider when to turn the heating on.
The cost of energy has been in the public consciousness since prices sky-rocketed after Russia’s invasion of Ukraine. The UK has been one of the worst affected European countries, partly due to our poor housing stock and our reliance on natural gas for our central heating.
In numerical terms, from the start of October 2023, the energy price in England, Scotland and Wales dropped from £2,074 to £1,923. On the face of it, that looks like good news. However, last Winter all households received £400 towards their energy bills under what was called the Energy Bill Support Scheme. There’s nothing planned for this Winter. Those on lower incomes also received cost of living payments, which are still being paid in instalments. You will also have noticed that since last Winter the cost of essentials has been creeping up, food shops are now significantly more expensive, rents or mortgages may have increased. Yet incomes have not been keeping pace.
Low incomes and increasing costs are not a good combination.
Looking back before prices rose
Tracking back before prices rose, we already knew that our most vulnerable households were struggling to keep their homes warm, or for some, even to afford to turn on the lights. I remember conducting a focus group with Christians Against Poverty (CAP) Debt Help clients in 2018, hearing one man explain how he felt lucky that there was a street light outside his house, because when he had no money on his Prepayment meter (PPM) it meant even in the dark he could see around his lounge.
Looking ahead to this Winter
This Winter will be even tougher for low income households. And this is not okay. Foodbanks are giving out cold packs, for people unable to heat their food. Warm spaces are being set up, places people can go stay warm. And it’s only October, spring is a long way away.
Customers are walking into this Winter with high levels of debt. There are now 3.2 million households in debt to their energy supplier with average arrears at a five-year high, according to a report by Uswitch. With average arrears amounting to £216. Figures obtained by Ofgem this summer show that energy debt reached £2.6 billion — its highest ever level.
Policies
The energy regulator, Ofgem, has been working hard to bring out policies for suppliers to help soften the impact on low income households. There’s good and bad news here.
✅ Earlier this year forced installation of PPMs were banned, following reports of bad practice and an exposing news article. If customers owe money to their supplier, they may be fitted with a PPM. This is a pay-as-you-go meter, where if you don’t have money, you don’t get your energy.
❌ From 8 November suppliers will be able to force-fit PPMs, but new rules ensure that they will not be able to do so until they have shown that they meet the strict criteria Ofgem have set. Households with certain vulnerabilities will be protected.
✅ Ofgem have released new rules to boost consumer protection for winter 2023/24, which includes, offering debt repayment plans at the earliest opportunity and giving due consideration to offer temporary debt repayment holidays, where appropriate.
❌ Ofgem have also released a consultation considering options amid rising debt. With bad debt levels expected to continue increasing, Ofgem is considering whether to add a one-off adjustment to the price cap to reduce the risk of energy firms going bust or leaving the market as a result of unrecoverable debt. This could see around £17 a year added to bills.
What are CAP doing?
We have joined the Money Advice Trust’s calls for a new scheme to be developed this Winter to help customers in debt, in a Help to Repay scheme.
We will continue to feed into consultations from the energy regulator, ensuring that those on the lowest incomes are able to stay warm this Winter.
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