Standard Licence Condition 27: difficulty in paying

CPAG

SLC 27 requires that suppliers produce and publish codes of practice setting out their procedures for customers who have difficulty in paying. You should obtain an up-to-date copy of your supplier’s code of practice, as they vary from one supplier to another. Suppliers must publish their codes of practice on their websites and provide copies on request.

The code of practice represents the stated policy of the supplier. It is not legally enforceable in individual cases, although a departure from the published code at policy level may be a breach of the relevant licence condition. Individual breaches should be reported to Ofgem or Citizens Advice consumer service (see Chapter 14).

The licence conditions state that suppliers must take certain steps when dealing with customers in arrears. In particular, they must provide protection for customers who ‘can’t pay’ due to low income or inability to cope, as opposed to those who ‘won’t pay’. Further provisions offer protection from disconnection for vulnerable groups such as those over pensionable age, who should not be disconnected during the winter months. In practice, suppliers typically install prepayment meters instead of disconnecting supply, although this may result in self-disconnection (see here).

The supplier must offer a number of services (a range of alternative payment options) when it becomes aware or has reason to believe that you are having or will have difficulty paying all or part of the charges for the supply of fuel.1Condition 27.5 SLC The following circumstances could indicate that there is a need for such assistance:

•high consumption (over £766 for electricity or £560 for gas per year);2;

•a sudden increase in usage;

•arrears equivalent to more than one quarter of your usual consumption;

•multiple priority debts – eg, rent, council tax or water arrears;

•payment by Fuel Direct or cash (prepayment or budget scheme);

•failed direct debit;

•a history of struggling to pay or self-disconnection;

•unpaid fuel bill;

•you live in a target area as defined by the fuel poverty index or indices of social deprivation.

1 Condition 27.5 SLC »

2 ; »

Proactive engagement and alternative repayment methods

SLC 27 requires suppliers to take a proactive approach and act before arrears accumulate where they are anticipated. It may be useful to quote these provisions when negotiating with a supplier. They include:1Condition 27.6 SLC

•using Fuel Direct, where available (see Chapter 11);

•accepting payments by regular instalments calculated in accordance with an agreed plan and paid other than by a prepayment meter;

•providing a prepayment meter or smart meter set on prepayment mode;

•giving energy efficiency advice.

1 Condition 27.6 SLC »

Ability to pay principle

SLC 27 requires suppliers (or third party representatives)1Suppliers are accountable for the action of any third parties they work with, Conditions 13 SLC and 0.2 SLC to take into account and understand your ’ability to pay’ when setting repayment plans with you and recovering debts.2Condition 27.8 SLC

Ofgem has developed six ’key principles’ that suppliers must fulfil to ensure they properly and proactively take into account your ability to pay and comply with SLC 27.3Ofgem, Review of suppliers’ approaches to debt management and prevention, June 2010 These should ensure that realistic repayment rates are set and there is a reduced risk of disconnection. The six key principles are:

•appropriate credit management policies and guidelines – suppliers’ policies and guidelines should be flexible and deal with debt repayment on a case-by-case basis to ensure suitable repayment rates are set. These should be incentivised on outcomes and not value of repayment rates;

•proactive contact to establish any payment difficulties – early intervention by suppliers to identify if you have payment difficulties and provide you with appropriate solutions;

•understand your individual ability to pay:

◦suppliers should gather information about your circumstances and make full use of that information when discussing your ability to pay;

◦suppliers should explore all payment methods available with you to find one that best meets your individual needs;

◦suppliers should make use of specialist inhouse teams or third party advisers;

•setting repayment rates reflective on your ability to pay:

◦suppliers should not insist on lump sum payments before agreeing to a particular repayment method;

◦standard or default repayment rates set by suppliers should be used as a guide and not a rule;

◦your circumstances should be taken into account when deciding upon a particular repayment rate (such as deduction rates from a prepayment meter);

◦suppliers should be prepared to alter repayment rates on prepayment meters to what is affordable, particularly where it has been installed without knowledge of your circumstances;

•ensuring that you understand any arrangement made:

◦suppliers should confirm any arrangement in writing with you;

◦suppliers should confirm the repayment amount with you;

◦suppliers should confirm the repayment period with you;

◦suppliers should make it clear you can contact them if you have a change of circumstances or experience difficulties with any arrangement;

◦for prepayment meters, suppliers should confirm that repayment amounts do not change, regardless of seasonal changes in usage;

•monitoring any arrangement once made:

◦suppliers should generally monitor repayment arrangements, in some cases for the life of the arrangement to ensure that the method of repayment is appropriate for your needs and affordable;

◦suppliers should monitor debt repayment arrangements that have been broken by credit customers;

◦suppliers should monitor prepayment meters to check if they are being used initially and on an ongoing basis to ensure they are set at the correct level, affordable and to avoid self-disconnection.

Non-adherence by suppliers to the key principles may suggest non-compliance with SLC 27.

1 Suppliers are accountable for the action of any third parties they work with, Conditions 13 SLC and 0.2 SLC »

2 Condition 27.8 SLC »

3 Ofgem, Review of suppliers’ approaches to debt management and prevention, June 2010 »

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