Covid-19 fallout likely to see consumers needing government help to pay their energy bills this winter warns Ovo Energy chief

Ending of furlough

Stephen Fitzpatrick, the CE of Ovo Energy has called on the government to provide a ‘greater social security net’ to assist consumers who now find themselves in financial difficulty as a result of the damaging economic impacts of the pandemic.

Rising unemployment is also a major concern with new government data revealing that 500,000 redundancies were filed in the first five months of the pandemic. With the furlough scheme due to end this month we are likely to see that figure soar to uncomfortable levels. 

Also read: Covid19: Energy Supplier concerns over bad debt grows ahead of furlough scheme end

Rising bad debts

The rising jobless rate is coinciding with the winter, a time when most households see their heating and electricity bills increase in the face of colder weather and fewer daylight hours. Spending on heating typically rises by ten times that recorded in the summer, adding increasing pressure to many household budgets.

Energy suppliers across the board are now reporting a rise in the amount of bad debt and number of customers unable to pay their energy bills. With winter rapidly approaching fears are growing that many hard-up people will be forced to choose whether to heat their homes or pay other bills such as rent or mortgages.

Ovo said that in recent weeks there has been a ‘notable increase’ in the number of customers contacting them for help. Other energy suppliers are seeing similar upticks in calls for assistance and advice. 

Struggling energy suppliers

It’s not just the consumer that’s struggling to pay the bills. Just last week Ofgem announced that it would fine seven energy suppliers for failing to pay their Renewable Obligations payments and Feed-in-tariff levelisation scheme.

If the suppliers fail to make the payments, they owe by the end of October deadline then Ofgem could move to revoke their energy supplier licences.

Energy suppliers have received assistance from the government and Ofgem much to the ire of the bigger companies who believe the support is just propping up smaller suppliers with bad business models.

Suppliers have been provided with £300m in support such as payment holidays to 800,000 customers between mid-March and mid-July.

Instead, the Big Six suppliers have called for the money to be given directly to supporting struggling consumers.

“It’s pretty obvious that private companies can’t indefinitely offer financial support to households in difficulty. This is the period we’re going to see how hard it’s going to bite, and I think it’s going to require the government to provide a greater social safety net. There’s only so much the energy sector itself can do, some of these challenges are not commercial, they are very definitely social issues so there’s a lot of conversations with the regulator, BEIS about how we are going to tackle this as an industry,” said Mr Fitzpatrick. 

Preparing for the worst

The unprecedented pandemic measures have seen the industry and regulator take swift action to try and reduce the negative impacts on both consumers and the energy suppliers themselves.

An energy supplier needs to demonstrate that it is on the consumers' side and those who aren’t will likely face severe consequences from Ofgem.

“The problem is not yet systemic but we’re making sure we are ready in case things change for the worse,” said Jonathan Brearley, chief executive of Ofgem.

Further Reading

How can Energy Suppliers reduce Energy Billing Errors?

Majority of UK public unwilling to pay higher energy bills to achieve NetZero carbon emissions target

Ofgem could issue final orders to seven energy suppliers over late Renewables Obligations Payments

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