Ombudsman Services | July 2020
Many customers have suffered a loss of income as a result of the Covid-19 pandemic and in consequence, some are struggling to pay their energy bills. We are aware that suppliers have recognised this and many have agreed to additional steps to identify and support customers who need it. However, we need to carefully consider any complaints that we receive about affordability to ensure customers have been treated fairly.
In this document we set out how Ombudsman Services will approach complaints related to problems with affordability caused by Covid-19.
Suppliers have always been expected to take account of a domestic customer’s ability to pay. But the pandemic means that more domestic customers will be financially vulnerable. So, if a domestic customer is experiencing difficulty, we would expect the supplier to have discussions with its customers to assess what they can pay and to adjust payment terms accordingly.
The pandemic has also impacted microbusiness customers. As with domestic customers, if a microbusiness is experiencing difficulty, we would expect the supplier to have discussions with its customer to assess what they can pay and adjust payment terms accordingly. This expectation is supported by Ofgem’s open letter of 16 June 2020.
Exactly how a supplier assesses affordability and what options it gives to customers will vary from supplier to supplier, but in each case, we will decide whether the supplier’s approach was reasonable. Suppliers will need to show how they have assessed ability to pay. Ofgem has, however, made it clear that this should be more than simply dividing the balance owed over a set number of months.
Because of Covid-19, many customers who usually pay their bills will experience a sudden, short-term impact on their finances. Hopefully, many of those people will see their income return as lockdown lifts. So, there may be a short-term issue where a number of customers are struggling to pay their bills.
Suppliers have already reached an agreement with BEIS on how to deal with the financial impact of Covid-19. They’ve confirmed they’ll consider measures such as reducing or pausing debt and bill payments for customers in financial distress.
In normal circumstances, it is not advisable to set customer payments at a level which is lower than consumption, but in these circumstances we would expect suppliers to consider this option (even setting payment terms to zero for a limited time) to recognise the unique circumstances.
However, where a supplier sets payment terms at under usage, we consider it advisable that the supplier then reviews the direct debit within a reasonable period of time (no longer than six months) to ensure that in the longer term the customer is not running up an unmanageable debt.
We expect that in most cases, suppliers will be prepared to be flexible in terms of payments. Where a supplier declines to do this, we will expect a clear reason to explain why no flexibility was shown.
Customers with prepayment meters could be amongst the worst impacted by Covid-19. Isolation and lost income could mean an inability to top up and self-disconnection.
The supplier agreement with BEIS set out additional support for prepayment meter customers, such as extending friendly credit, allowing third parties to pick up discretionary credit, switching Smart prepayment meters to credit or extending non-disconnection periods, and giving advice on what to do in the event of self-disconnection.
These were positive commitments and we will assess whether prepayment meter customers were afforded suitable additional support.
We recognise that seeking payment of unpaid bills is a necessary activity for energy suppliers. But we would expect an approach that first seeks to identify and help customers experiencing payment difficulty. Further, Ofgem has set out its expectations that suppliers should not engage in aggressive debt collection activity.
We will assess whether a supplier sought to help a customer with their payment difficulties prior to debt follow up. And we would expect any debt follow up to be proportionate.
Customers in financial difficulty may seek to recover the credit balance on their account. We expect suppliers to provide a prompt refund where there is a genuine credit on an account. Or provide a clear explanation where no credit is due (for example if the credit was only showing because the account had not been billed up to date).
When reviewing complaints from customers who have experienced affordability issues caused by Covid-19, we will consider:
whether suppliers have treated customers fairly;
whether suppliers considered customer’s specific circumstances and showed flexibility as appropriate;
whether suppliers sought to identify and support struggling customers; and
whether suppliers were proportionate with any debt collection activity.