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Households Will Need Help Paying Heating Bills This Winter, Ovo Warns

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Struggling households will likely need government support to pay their heating bills this winter, one of the UK’s largest energy suppliers has warned, as utilities report an increase in consumer defaults and debts.

Stephen Fitzpatrick, chief executive of Ovo Energy, said the government will need to provide a “greater social safety net” this winter, as the end of the furlough scheme, a forecasted uptick in unemployment and a second wave of the virus coincide with higher energy consumption and bills.

In the spring, energy companies reached an agreement with the Department of Business, Energy and Industrial Strategy (BEIS) not to disconnect households for non-payment during the pandemic. This has meant extending credit and payment holidays to customers who can’t afford to pay in order to keep them on supply. 

Regulator Ofgem has calculated that suppliers provided £300 million in support to 800,000 households between mid-March and mid-July.

But companies have cautioned that they can’t take on huge debt burdens in an industry that operates on thin margins and where around 20 suppliers have failed since the beginning of 2018. Seven suppliers have already been cautioned by Ofgem over their failure to pay levies supporting renewable energy this year.

So far suppliers have reported that the number of households struggling to pay their bills has been lower than anticipated, with the financial impact of the coronavirus crisis cushioned by the £39 billion furlough scheme. 

However as the scheme has wound, down, Ovo says it has seen a “notable increase” in customers contacting them for help.

“It’s pretty obvious that private companies can’t indefinitely offer financial support” to households in financial straits, Fitzpatrick told the Financial Times.

“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,” he added.

Ofgem has already handed suppliers a £350 million bailout, allowing weaker energy suppliers that can’t obtain funding elsewhere to defer payments to energy network companies. Larger suppliers have raised objections to the scheme, saying the support is simply allowing companies with unsustainable business models to continue operating. They would rather see the help handed directly to consumers.

Helping struggling households pay for heating “is not insurmountable” when compared to other coronavirus relief measures, Fitzpatrick said. However, he wasn’t able to provide an estimate of how much this would cost.

But “there’s only so much that the energy sector itself and the energy industry can do, some of these challenges are not commercial, they are very definitely social issues so there’s lots of conversations with the regulator, with BEIS about how we are going to tackle this as an industry,” he said.

“I hope that we see some movement from government before we reach the depths of winter.”

Jonathan Brearley, chief executive of Ofgem, said the problem of households struggling to afford energy bills was not yet “systemic” but “we’re making sure we are ready in case things change for the worse.”

The End Fuel Poverty Coalition has already warned that the economic crisis could leave an additional 200, 000 households struggling to heat their homes this winter, leaving them more vulnerable to coronavirus and its more serious complications and to other health problems that could overwhelm the NHS.

Ovo, which became the UK’s second-largest energy supplier following the £500 million acquisition of SSE’s retail arm earlier this year, is now trying to raise £300 million through an upcoming share sale. It intends to use the funds to invest in its technology platform and advance into international markets, including in Germany and Australia, where it already has footholds.

Lauren Smith
Lauren Smith

Lauren Smith has worked as a journalist and copywriter for most of the last decade, covering technology, energy, and consumer rights, in the US and UK.

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