Energy advice update: Four steps to dealing with energy debt
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Our energy advice team works to support people across Greater Manchester and Lancashire who are struggling with their energy bills.
As part of this they’ve worked alongside many people locally, and have helped clear £49,897.83 of energy debt from people using our service.
They’ve used this knowledge and experience to put together four steps that anyone facing energy debt can take to improve their situation:
Step one: Keep hopeful
Being in debt can be a stressful experience. However, energy debts are one of the more manageable debts that you can have. This is because energy debts, unlike credit card debt or others, do not earn interest. However, the debt may continue to increase with each bill if you take no action to lower usage or increase payments.
Energy companies are also obligated to work with you to find an acceptable solution and must allow you to pay the debt off at a rate that is reasonable and affordable to you. They’re also forbidden from cutting off your energy supply even if you have a debt with them. While they may be able to install a prepayment meter, this is a long process which requires them to get a court order. If you are classed as a vulnerable energy consumer, your supplier may not be allowed to install a prepay meter in your house.
Small amounts of debt are also usual, especially during the winter months when we naturally use more energy due to the colder weather. During reduced usage in the summer months, the bills should balance over a full year. If you have a direct debit set up which covers your usage over a year, enforcement action should not be taken against you.
Energy debts are best dealt with calmly and when you are in the right headspace. Once you feel that you’re ready to deal with issues, making contact with your supplier is your next step.
Step two: Make contact
Get in touch with your energy supplier and explain your situation.
Our energy advice service team may be able to support you with this.
As mentioned previously, companies have an obligation to reach a resolution that works for both of you and should not ask for the whole amount to be paid at once.
If you’re eligible, make sure you are included in the Priority Services Register of your supplier. This will ensure that they have a full record of any vulnerabilities that may exist in your household. This could also help you show them why you may have fallen behind on your bills and can make you eligible for further support.
If you feel that your situation is not being taken seriously, send an email to your supplier. This will ensure that they have a physical record of your attempt to deal with the situation and can be used later on if you want to make a complaint.
You can also use this call to check that the debt amount is fully correct. While energy meters are very rarely faulty, there can be several reasons why the debt listed could be incorrect. Some common examples include:
Incorrect/estimated meter readings: Energy companies require full up to date meter reads to bill you accurately. Check if the meter in your house matches the readings that the company has provided.
Crossed meters: Sometimes your meter can be wrongly registered to a different address. Check if the serial number on your energy bill matches the one the company is billing you for.
Mixed addresses: Occasionally suppliers can mix up which property they think you live in and bill you for usage of another property. Ask your energy supplier if the unique registration number they hold for your house called the MPAN or MPRN matches what is held on the central database. This issue is more common with new build properties or for those living in blocks of flats.
Incorrect periods of time: If the debt looks higher than what you would have imagined, double check the billing period on the letter or bill. There may be an issue where you are being billed for a period where you did not live in the house.
Step three: Create a repayment plan
Once you are sure the debt is correct and feel ready to deal with it, create a repayment plan that works for you.
Before doing this, it’s important to be honest about what you can afford to pay for. Setting unrealistic debt repayments that you can’t keep is likely to land you back at the beginning of the process and cause you to miss important payments. Repayment plans are also classed as a credit agreement and may in some cases affect your credit score.
At a minimum, you want to try and cover the energy that you are using each month to prevent the problem from getting worse. To work this out, find out how much you are expected to use over the next twelve months. Taking this figure and dividing across the year will give you an idea of what monthly payment will prevent the debt increasing.
For example , if your total cost for the year is expected to be £1,200 for electric and £700 for gas, this makes your total energy costs for the year £1,900. Since we want to ensure that this is paid over 12 months, divide that figure by 12. This gives you a minimum monthly amount to prevent the debt from growing of £158.33.
If the amount that you are expected to use over the year oversteps what you can reasonably afford, then ask your supplier to set it at what you can afford for now. Paying something is always better than paying nothing.
With usage covered, you can then look at paying the debt that you have. Paying the debt as part of your monthly payments can help you to keep on track and avoid confusion.
For example, if your total debt balance is £625 across both fuels then paying this off in 12 months would cost you £52.08 per month.
Adding your monthly usage to your debt payment amount would give you an idea of the appropriate amount that you should be paying to become debt free.
For example, your usage £158.33 plus your repayment rate £52.08 would give you a monthly payment of £210.41.
You can then either set up a direct debit with your supplier to pay this off autonomically each month, or if you are uncomfortable with direct debits, some suppliers may also offer other options such as payment cards or standing orders.
Step four: Find support
Lots of support is available if you’re struggling to manage your energy debt both from energy suppliers and charities.
Reaching out to organisations or finding the right support with your supplier can help you manage the situation.
If you are based in Greater Manchester or Lancashire, please come and see one our energy advisors or call our team on 0161 205 2754
Most energy suppliers will offer support schemes for those in financial difficulty. While the type of support offered can vary, these schemes can provide options such as:
Standing charge holiday: This gives you a month or several months of not having to pay standing charges, which can reduce your bill by £20-40 per month. This support is usually short term and cannot be used repeatedly. Furthermore, it is only available for people on their supplier’s support scheme.
You pay, we pay: This sees the energy company matching all the payments you make for a set period, making it quicker and easier to get out of debt. This support won’t be offered by all suppliers and is on a strict case by case basis meaning you have to access it through your supplier support scheme.
White good or winter warmth packs: This support can offer more energy efficient white goods to help reduce your energy bill or items to help you stay warm.
The suppliers British Gas and Scottish Power also maintain an energy support trust which is managed by charities on their behalf. This support fund provides grants that go towards existing debt balances.
There are also several charities that can support you with issues relating to energy debt such as Stepchange, Citizens Advice or the National Debtline.
We’re always happy to help and you can find us at one of our regular free drop-in sessions, or can get in touch by emailing energyadvice@caritassalford.org.uk.