Beware the changes proposed to cut energy debt, says Paul Lewis
Later this year energy suppliers will be able to cut off the electricity and gas of people who move home and fail to sign up to an energy provider within about a week. These new proposals by the energy regulator Ofgem are part of a plan to reduce the £4.5 billion of debt that householders currently owe to energy suppliers. The regulator estimates well over £1 billion of it is built up when people move home but do not sign up to a new supplier at once.
Once the change is made (probably this autumn or winter), then when a home changes hands the smart meter would be remotely switched into prepayment mode. The smart meter will have enough money for around a week’s worth of energy – Ofgem has suggested that might be around £30. But when that runs out, the electricity and gas will be cut off if the new occupiers have not taken out a contract with a new energy supplier. Ofgem hopes this will – in its words – “prompt” people into signing up.
Of course, when you move home, you should tell the supplier when you move out and quickly sign up to a provider for your new home. But Ofgem says it takes, on average, more than 70 days after people move into a home before they sign up to a new supplier, partly because the supply continues. That delay stacks up a debt that can be hundreds of pounds for the energy they’ve used but not paid for.
Ofgem says the change will not only ensure people who move don’t build up a debt. It will also reduce the £52 that is currently included in every energy bill to pay for the cost of that £4.5 billion debt, which it hopes this change will reduce.
The proposed system will still be more generous than those in other countries in Europe and the Americas, where the property is disconnected from supply when there is a change in the tenant or owner.
The new rules will only affect people who move into a home with a smart meter. Homes with dumb meters, which are read manually, are not affected as they cannot be changed to prepayment remotely.