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Plunging temperatures shouldn’t mean people falling into debt.

by Kate Morrison, CAS Strategic Lead for Fair Markets

This column was first published in the Herald on 03 February 2021.

This January, as temperatures plummeted and pavements were often a sheet of ice, Citizens Advice Scotland turned our annual Big Energy Saving Week campaign into Big Energy Saving Month. Our aim was to inform consumers about their rights when it comes to energy, and to help them cut their bills.

Scotland’s challenges around fuel poverty are well documented. Around 1 in 4 households are in fuel poverty, and of that over 300,000 are in extreme fuel poverty, handing over a fifth of their income to heat their homes. This figure is estimated to increase as a result of Covid-19, as we all spend more time at home.

A growing issue among the challenges of energy bills is fuel debt - owing money to your energy supplier. In December, our network saw a 13% increase in fuel debt cases, as a proportion of all the debt advice we issued. Such a sudden increase is always concerning, and is particularly worrying as Scotland enters a second lockdown in the coldest months of the year. It is likely that fuel debt will be a contributing part of the ‘tsunami of debt’ we expect to see this spring and summer as lockdown eases.

However, while this spike in fuel debt may have been exacerbated by the pandemic, it has been a growing problem for a number of years, with such cases rising from less than 3 per cent of total debt advice to nearly 6 per cent since 2016.

Those figures may seem small, but a close to doubling of a specific area of advice is the sort of trend the Citizens Advice network is used to spotting before it becomes a larger problem for people across the country.

Nor is it a small issue for the people affected. Last year we undertook an analysis of our ‘complex debt’ clients – people who owed multiple debts. We found that 1 in 4 of these clients owed some sort of utilities debt, with the total value of the debt being over £1.7 million and the average debt per client being more than £1,300.

Being in fuel debt is also a barrier to one of the most common ways people seek to save on energy bills – switching supplier. If you’re in debt to your gas or electricity supplier, whether you can switch to another supplier depends on how long you’ve owed the money. If you've owed it for 28 days or less, you can switch; the debt will be added to your final bill from your old supplier. But if you've owed the money for more than 28 days, you can't switch supplier until you've paid the money back.

It’s worth noting though that you can’t be stopped from switching if it's your supplier's fault that you are in in debt - for example because they've estimated your bill wrong.

There are also different rules for switching supplier if you pay in advance for your energy, which in Scotland people are more likely to do than any other nation in Great Britain.

People on prepayment meters can’t switch suppliers if they owe more than £500 for gas or £500 for electricity. This is problematic because consumers in Scotland with prepayment meters are more likely to be vulnerable and are significantly more likely to be in fuel poverty than those who pay for their energy by direct debit or standard credit before the pandemic began.

If you are struggling with energy debt repayments, your supplier must consider your ability to pay and you should contact them in the first instance. You can also take small steps to save energy such as not leaving appliances on standby and drawing the curtains on cold nights.

As is the case with most of the debt problems we see, the issue here is one of inadequate income rather than over-spending. To that end we were pleased to see the UK Government’s Energy White Paper confirm that the Warm Home Discount (WHD) is set to be extended and increased.

Previous research from CAS revealed that this discount - £140 off your energy bills – was an absolute lifeline for people who got it, helping them afford their energy and often lifting them out of fuel poverty. However, we also found that the WHD isn’t reaching all the people it should. In fact we estimate that around 29-32% of Scottish households are eligible for the WHD, but less than 10% are currently claiming it. We’d like to see the scheme better targeted at those in need.

Every household in Scotland pays towards this fund through their bills - including those in fuel poverty - so a one third success rate is clearly not acceptable, and nor is that fact that families across Scotland are suffering the cold or going into debt to keep the heating on when they don't need to.

In the longer term, we need to make our homes more energy efficient. This won’t just cut emissions, it’ll cut bills too. We were pleased to see the Scottish budget last week confirm more investment in energy efficiency measures and we would strongly encourage further investment in the years ahead.

For people facing fuel debt against a flat or reduced income now, there is always help at hand from the Citizens Advice network. Last year we launched, a tool that helps you cut your living costs and increase your incomes, and our local CABs have been providing advice throughout this crisis and will continue to do so.

So, if you are struggling to heat your home, remember our help is available. Simply put, plunging temperatures don’t mean you have to be plunged into debt.