Utility Week

UTILITY Week 31st March 2017

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24 | 31ST MARCH - 6TH APRIL 2017 | UTILITY WEEK Customer service & bad debt D ebt, in particular bad debt, is a peren- nial problem for the energy and water companies. And the bad debt prob- lem is getting worse. Analysis from PwC has revealed a 60 per cent rise in bad debt across the energy sector, and the water sector has seen a 44 per cent increase. This burden adds hundreds of millions of pounds to the total customers have to pay, and utilities are eager to recoup as much of this as possible. For water companies, the growing bur- den of bad debt rose from £263 million to £379 million in 2015. The impact on cus- tomer bills is an increase from an average of £15 to £21 a year in England and Wales. Energy companies face similar problems. In the four years from 2011 to 2015, bad debt to energy retailers rose from £400 million to £640 million. This level of bad debt, which is debt that cannot be recovered, increases business risk for utility companies, and they have to find ways to service and cover these costs. Some offer, and are obliged to offer, social tariffs, under which vulnerable consum- ers are given discounted rates and different payment options to ensure they can at least pay something towards their utility bills. The logic behind this is that collecting some money is better than nothing at all. For this to work, companies must con- tact the customer, decide whether they are a "can't pay" or a "won't pay" customer, and then follow courses of action to deal with the affordability of energy and water bills. Affordability is a complex subject with many variables. A customer's ability to afford a service is not fixed by income alone, but also by family and personal circumstances, such as school-age children or dependents with disabilities, other financial commit- ments and previous credit history. This complexity, tied in with the customer service aspect of the utilities, means it can be difficult to recover debts and deal with the unrecoverable money that is owed. In this special report, Utility Week looks at some of the customer service techniques that are used to help address the issue of bad debt, and how this practice will evolve in the future. Utilities count the cost of debt Energy and water companies must understand the circumstances of customers that cannot afford to pay their bills – and customer service is the key. Customer service & bad debt "The four million households on pre-payment meters are typically more vulnerable. Yet the cheapest deals aren't available on pre-payment meters. With many stuck on these meters because they are in debt, those most in need are denied the benefits of competition." Dermot Nolan, chief executive, Ofgem "For PR19, we will be looking for efficient debt management practices and considering ways to reduce bad debt." John Russell, senior director of strategy and planning, Ofwat

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