Supplier Protection Payment

[Deleted User]

'A one-off rise to energy bills of up to £17 a year to help prevent suppliers going bust is being considered by the UK's energy watchdog.

Ofgem said it was considering the measure to protect the market and consumers after figures showed energy debts reached £2.6bn in the summer.

The rise in debt was due to both the increase in wholesale energy prices and wider cost of living pressures.

Any rise in bills would not take place until April next year, Ofgem said.'

Source: BBC Business

MattMattMattUK

It could potentially help, but the reality is it is a sticking plaster for a broken debt recovery system, if the suppliers were allowed to recover debts more forcefully and cut off non-payers then it would likely be less of an issue. They are still forced to continue supplying non-payers, people who refuse to engage with them about debt repayments etc. They probably also need to allow for more bad debt in the operating costs, as well as an increase in the costs of finance from rising interest rates, otherwise even big suppliers could face issues. 

Gerry1

A one-off rise of £17 per year?  That's a contraction in terms.  The BBC's article is confused, but that's hardly surprising when the Ofgem consultation is such dense gobbledegook that no reasonably intelligent ordinary person could understand it and respond.

Of course, much of the blame for 30 or so companies going bust can be laid at Ofgem's door.  Companies operating out of front rooms, money mountains from excessively high fixed DDs, variable DDs not even being an option, the list goes on.  If Ofgem had done its job properly in the first place we wouldn't had all these ongoing problems.

The fact that customers are likely to have to pay what amounts to an insurance premium suggests that Ofgem's regulatory performance isn't going to improve anytime soon.

https://www.theguardian.com/business/nils-pratley-on-finance/2022/jul/26/ministers-one-fears-still-havent-grasped-scale-of-ofgem-regulatory-failure-energy-market

TheElectricCow

Have to agree with MattMattMatt here, let's have consumers pay for their own bills and allow suppliers appropriate measures to peruse legitimate debts from the non-engaging customers. Naturally protections should remain in place where a debt is is challenged or were the consumer is actively attempting to reach a repayment agreement. The best solution can't really be to squeeze more out of those who do pay to cover the losses from those who don't.

At the same time, mandating more sensible billing practises could also be beneficial - there seems to be no end to the stories we see here from people on quarterly billing cycles with questionable fixed DDs.

pseudodox

TheElectricCow said:

Have to agree with MattMattMatt here, let's have consumers pay for their own bills and allow suppliers appropriate measures to peruse legitimate debts from the non-engaging customers. Naturally protections should remain in place where a debt is is challenged or were the consumer is actively attempting to reach a repayment agreement. The best solution can't really be to squeeze more out of those who do pay to cover the losses from those who don't.

At the same time, mandating more sensible billing practises could also be beneficial - there seems to be no end to the stories we see here from people on quarterly billing cycles with questionable fixed DDs.

The move away from quarterly billing (which used to be the norm) to a monthly billing cycle as prices of energy started to be a major household cost was a postitive step to helping people get a handle on their energy bills.  Most workers and pensioners are on a monthly income.  And of course FDD is a great solution for many people, whilst others like myself, who used to have no problem budgeting for higher quarterly bills in winter, find doing the same for monthly bills an absolute doddle.  But surely whatever monthly method of payment is taken there should be mandated monthly statements of account to enable people to see whether they are paying enough (or too much).  With MVDD I know exactly where I am up to - once my monthly usage is billed and DD is taken I am on a level playing field and if I want a blast of heat I will pay for it next month but it will not accumulate to an escalated debt months down the line.  

There will always be vulnerable individuals who need support (and financial help should come through benefits system, not from other customers) but I wonder how many people have lost control because they see FDD as "all you can eat".  This MSE site only sees the input from a tiny proportion of the energy consuming market and judging by the trouble so many on here find themselves coping with it makes you wonder just how many more are out there, completely at sea and despairing.  Those of us who can manage our finances accept that our taxes can be used to support the "deserving poor"  but I do object to paying for those who think they can take all they want as a free ride and as indicated above refuse to engage with support for debt management.

born_again

pseudodox said:

TheElectricCow said:

Have to agree with MattMattMatt here, let's have consumers pay for their own bills and allow suppliers appropriate measures to peruse legitimate debts from the non-engaging customers. Naturally protections should remain in place where a debt is is challenged or were the consumer is actively attempting to reach a repayment agreement. The best solution can't really be to squeeze more out of those who do pay to cover the losses from those who don't.

At the same time, mandating more sensible billing practises could also be beneficial - there seems to be no end to the stories we see here from people on quarterly billing cycles with questionable fixed DDs.

The move away from quarterly billing (which used to be the norm) to a monthly billing cycle as prices of energy started to be a major household cost was a postitive step to helping people get a handle on their energy bills.  Most workers and pensioners are on a monthly income.  And of course FDD is a great solution for many people, whilst others like myself, who used to have no problem budgeting for higher quarterly bills in winter, find doing the same for monthly bills an absolute doddle.  But surely whatever monthly method of payment is taken there should be mandated monthly statements of account to enable people to see whether they are paying enough (or too much).  With MVDD I know exactly where I am up to - once my monthly usage is billed and DD is taken I am on a level playing field and if I want a blast of heat I will pay for it next month but it will not accumulate to an escalated debt months down the line.  

There will always be vulnerable individuals who need support (and financial help should come through benefits system, not from other customers) but I wonder how many people have lost control because they see FDD as "all you can eat".  This MSE site only sees the input from a tiny proportion of the energy consuming market and judging by the trouble so many on here find themselves coping with it makes you wonder just how many more are out there, completely at sea and despairing.  Those of us who can manage our finances accept that our taxes can be used to support the "deserving poor"  but I do object to paying for those who think they can take all they want as a free ride and as indicated above refuse to engage with support for debt management.

End of the day, who pays for the benefits system? Tax payers, who will be energy users. So it really is the same source.

I agree with @MattMattMattUk on  if the suppliers were allowed to recover debts more forcefully and cut off non-payers then it would likely be less of an issue.

This is where Ofgem need to allow the companies more freedom to pursue debts & reclaim money. Perhaps set up something that looks at the debtors income & expenditure. Then balances out that their holidays & other luxury spends are not counted, so can go to pay debts.

pseudodox

Charging £17 on every energy bill would not be as fair a collection method as using money from general taxation.  That energy bill surcharge might be for a single household on a pension or low income already struggling with bills but above a benefits claim level. Or it might be for a family/household with 2 or more tax payers, or possibly some very high earners to whom £17 would be peanuts.  

matt_drummer

pseudodox said:

Charging £17 on every energy bill would not be as fair a collection method as using money from general taxation.  That energy bill surcharge might be for a single household on a pension or low income already struggling with bills but above a benefits claim level. Or it might be for a family/household with 2 or more tax payers, or possibly some very high earners to whom £17 would be peanuts.  

Surely charging every bill payer who is protected is fairest?

In fact you could argue that tax payers, especially high earners, are the least likely to default on their payments and shouldn't pay anything at all?

Maybe those who are at most risk of defaulting should pay for this.

I go to work and pay my taxes that fund benefits and now I have to contribute even more to fund the people I am already funding not to pay for their energy.

And you think that is fair?

debitcardmayhem

Of course the £17 will be added to the bills of the non-payers adding to the losses or am I  just be too simplistic?

ArbitraryRandom

I'd like some clarification if they're taking about adding £17 to every (presumably electric) energy bill on 1 April - or if what is meant is an increase to the standing charge so over the year the customer pays £17 more (5p a month)... and if we'll even notice given I believe £17 is less than we've all been paying to cover the SOLR costs over the last couple of years (which I believe are supposed to end soon). 

molerat

ArbitraryRandom said:

I'd like some clarification if they're taking about adding £17 to every (presumably electric) energy bill on 1 April - or if what is meant is an increase to the standing charge so over the year the customer pays £17 more (5p a month)... and if we'll even notice given I believe £17 is less than we've all been paying to cover the SOLR costs over the last couple of years (which I believe are supposed to end soon). 

CI's forecasts for next April show an increase of 8p on the current SCs, they must be getting information from somewhere.  That SOLR uplift is not going away anytime soon, the SC is now becoming just another tax.