Ofgem has announced a series of measures to help those in energy debt on prepayment meters to switch to a better deal.
Ofgem has announced a deal with energy suppliers aimed at increasing the number of prepayment meter households switching their energy, including raising the debt threshold. The energy regulator also plans to increase awareness of switching rights for those in debt.
The current rules state that any prepayment customers with more than £200 worth of energy debt can’t switch, but Ofgem will raise this limit to £500 from the 1st of November 2012 in a move potentially impacting tens of thousands of households.
The announcement precedes Ofgem’s annual social obligations montiroing report which will show a significant reduction in the number of households being disconnected from their energy supply in 2011 – a reduction of 54% for electricity and 59% for gas.
The report will also show that despite the fall energy debt remains high. More than 315,000 electricity, and 320,000 gas, prepayment meter customers are in energy debt, with the average level of debt £357 for electricity and £371 for gas (up from £339 in 2010).
What we say
Ann Robinson, Director of Consumer Policy at uSwitch commented: “This move is very welcome as it opens up the opportunity for energy customers struggling with debt to move to a cheaper deal.
“At the moment, prepayment customers with debts over £200 are stuck in a catch 22 – moving to a cheaper plan could help them save money, but they can’t move because they are in debt. Raising the threshold in this way means that many more will be able to benefit from lower prices.
“However, we would urge Ofgem to go one step further and to provide the same clarity for consumers on standard meters who are also in debt. Many of these are also being prevented from switching to a more competitive deal and the debt threshold can vary between suppliers.
“Introducing a universal debt threshold will give these customers clarification and the confidence to shop around for a better deal. It will help to make the market more transparent and easier for consumers to understand their rights.”
On a prepayment meter? In debt?
Those currently on a prepayment meter with less than £200 worth of debt should see if they can save by switching their energy plan. Those with between £200 and £500 worth of debt should run a comparison after November 1st.
Those in energy debt should also write to their supplier to see if they can negotiate a more affordable repayment plan. You can read more about what to do in our guide on energy debt.