Utility Week

UTILITY Week 31st March 2017

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UTILITY WEEK | 31ST MARCH - 6TH APRIL 2017 | 27 Customer service & bad debt 11% Households that spend more than 5% of income on water and sewerage bills. 24% Household that spend more than 3% of income on water and sewerage bills. 56% Increase since 2012 in those needing help to manage debts. 17% Increase in rev- enue outstanding from 2010-14. 10% Increase since 2010 in proportion of customers con- tacting National Debtline. £1.9bn Revenue out- standing in 2010. £2.2bn Revenue out- standing in 2014. WATER NUMBERS "Our research revealed a number of potentially concerning aspects in how debt is being collected across the UK, particularly in certain sectors. Many customers are still being caused additional distress when in arrears, when in fact many feel incredibly guilty already." Monica Mackintosh, customer service director, Echo Managed Services "Setting up a fund to support vulnerable customers is a welcome step to help some of those who can least afford bills." Gillian Guy, chief executive, Citizens Advice plans, we will be looking for efficient debt management practices and considering ways to reduce bad debt levels." Russell said: "We will challenge companies' bad debt levels in our price-setting process. We will do that by using evidence from within the sector, and from other sectors." He also highlighted evidence that increasing numbers of customers are struggling to pay their utility bills. One in five households across England and Wales now say they feel their bills are unaffordable. The problem of bad debt, especially in the water sec- tor, has been highlighted further as the government con- tinues to push for domestic retail competition. The Department for Environment, Food and Rural Affairs (Defra) said the challenges of bad debt and innovation must be resolved before the introduction of domestic water competition. PPMs and smart meters In the energy sector, indebted customers are also an issue. Of customers with pre-payment meters, 42 per cent are using them to repay a gas debt and 39 per cent are using them to repay an electricity debt, according to Ofgem figures. Failure to keep the meters in credit, a proportion of which goes straight to paying off some of the accrued debt, could result in self-disconnection. However, Energy UK members have signed up to the Safety Net for vulnerable customers in 2004. This was set up to prevent self-disconnections, with the member organisations making a commitment to never knowingly disconnect vulnerable customers. If a customer has been disconnected and is subse- quently identified as vulnerable, the supplier will recon- nect its customer as a priority. The impact has been profound. In 2003 there were about 16,000 disconnections of domestic customers for debt in the UK. In 2015 – the most recent year for which published data exists – there were just over 250. However, more can still be done, and the suppliers, both across energy and water, are seeking to do more to prevent customers, in particular vulnerable ones, from getting into debt. Utilities are seeking to use technology, data quality audits and affordability assessments to get an insight into what services consumers are able to afford, enabling them to offer more realistic payment plans. Eamonn Tierney, managing director of Credit Solu- tions, said: "Affordability assessments using big data technologies give the most accurate, real-time view of a customer's income, living costs and spending habits without the need for manual intervention. "By gaining a complete understanding of custom- ers' financial circumstances from the day they sign up, you as a utility provider have a better view of their ability and readiness to pay bills on time, and can help ensure they can afford the payment plans they sign up to." By working with customers and predicting those who may enter difficulties, utilities can improve the service these customers receive. Customers that receive well-targeted mobile commu- nications are more inclined to pay their debts on the spot because automated communications are less embarrass- ing than talking with a collections agent. Tailored, auto- mated contact enables personal, secure and convenient self-service options for making a payment, or even nego- tiating a payment plan. Identifying issues before they become bigger prob- lems, and engaging and working with customers, is key to solving the bad debt problem. This improved customer service will lead to a better relationship with the bill pay- ers, and to the recovery of more money in a sustainable manner. DOMESTIC DISCONNECTIONS AS A RESULT OF DEBT 200 150 100 50 0 204 domestic electricity accounts 49 domestic gas accounts ACCOUNTS IN DEBT AVERAGE DEBT 0 1 2 1.2 million domestic electricity accounts £420 electricity accounts 1 million domestic gas accounts £407 gas accounts 0 100 200 300 400 Ofgem figures as at 30 September 2016

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