Supporting your customers through a challenging winter

This year only 1.5 million, down from 11.4 million people last year in England and Wales will be eligible for the winter fuel payment, the scheme which was originally set up to help those in need to meet their higher fuel bills during the cold winters.

The reduction is part of a well-publicised government decision in July as Chancellor Rachel Reeves moved to immediately plug a £22 billion hole in the public purse. The winter fuel payment will now be limited to people over state pension age who are receiving pension credit, or wider welfare support like universal credit. The aim is to save around £1.5 billion each year.

A sweeping change, but at what price?

This decision will undoubtedly lead to more households struggling to cover their winter energy costs.

There is lots to consider, not only what impact this will have on customers, but also on the energy companies themselves.

It’s also important to mention the Energy Price Cap as some customers may have missed this increased on 1 October and is set to increase again in January 2025 and then again in April before falling in July and October next year. Although energy prices are not as high as they were 12 months ago, they have never returned to lower than the pre-energy crisis prices and the current predictions suggest next year’s prices will be higher than the current year, which makes the situation worse. The winter fuel payment helped towards getting these people through the winter – but not anymore.

Consultancy firm, BFY Group, reported that energy debt hit a new peak of £3.7 billion as of Q2 2024 and the average debt per customer rose to a record £1,094. Energy debt has continued to increase by 40% since Q2 2023.

Growing energy bills aren’t just an issue for households in receipt of social security or those missing out on the winter fuel payment this year. There are millions of low-income households who month on month just about keep their heads above water. The likelihood now is they will either self-ration to save on heating costs or accept their bills will go up and face the financial consequences later. It’s an extremely tough situation and a group we must be aware of.

That’s a snapshot of the issues and concerns on the horizon, but there are things energy providers may want to consider to support their customers, such as:

1. Find a technical solution for prepayment customers to smooth payments through the winter. This includes offering consumers to pay a little more through the summer months which then goes towards the higher bills in the winter or allow customers to accrue a debt through the winter and pay it off over the summer months.
2. Through their marketing channels, communicate energy efficiency solutions so customers understand what they can do to spend less on energy such as
   1. Insulating their home
   2. Installing Energy-Efficient Heating Systems
   3. Window and Door Upgrades
   4. Energy-Efficient Lighting
   5. Renewable Energy Solutions such as solar
   Whilst a lot of these measures can be expensive there is a lot of help available with funding to support this.
   or:
3. Have a better understanding of those customers who are not paying their bills so they can reach them, understand their problems, and try to find solutions to help them. Making contact is sometimes the most difficult step but once that silence has been broken customers are often surprised at the amount and variety of support available to them, like grants, hardship funds and discounts on energy efficiency measures.

Reaching those most in need

Though there’s a sizable saving for government through their changes to the winter fuel payment, the key issue with this decision is that there are thousands of pension credit eligible residents who aren’t currently claiming it and who will now go without the winter fuel payment this year.

These are some of the most vulnerable households in the UK. The onus is now on them to proactively apply for pension credit to ensure they automatically get the winter fuel payment, but the reality is that thousands of people will simply go without.

Policy in Practice’s latest report, ‘Missing Out 2024’ estimates a staggering £23bn of income-related benefits and social tariffs goes unclaimed each year. Of that figure, £2.2bn is unclaimed support available through pension credit.

A lack of awareness, the complex criteria around eligibility and the stigma associated with benefits are just some of the reasons why this mountainous figure persists year on year. Sometimes it’s simply a lack of support to call on, like friends or family, for when it comes to filling in forms.

But it’s not just welfare support that millions of people are going without.

Energy providers have put aside millions in support for their customers, including help towards outstanding debt or practical help with more energy-efficient appliances like cookers, fridges and washing machines to replace old or broken models. There’s even support available with smaller products like hot water bottles and heated blankets.

This practical support for customers can make a massive difference, but reaching those households who would benefit most from this support remains an ongoing issue for energy providers.

There’s a misconception amongst customers that their energy supplier is purely concerned with the recovery of debt, that you as a supplier wouldn’t be able to help them or wouldn’t want to help.

We’re here to help

We’re tackling this monumental problem through ReachOut. Our team of Pathfinders (our agents) are proactively engaging harder to reach customers, to help them access all the additional income and support they’re entitled to.

Through our engagement and the impartial and confidential space we provide customers, we can help tackle this misconception, promote the support available through third parties (like debt advice), and get your customers back to you to discuss the support you can provide directly.

We take time in each conversation to listen and to reassure the customer that there is support available to them. We’ll then provide them with a tailored plan moving forward and promote the benefits of speaking with their supplier then and there through a warm transfer.

It’s a strategy specifically designed to engage those customers who haven’t responded to your communications – those more vulnerable residents who haven’t accessed the support you offer and who might be on track for further recovery action if there’s an outstanding debt. It’s an approach that sees us reaching an average of 27.5% of those people who had completely disengaged from their service provider.

In short, we can help you to:

• Re-engage a significant proportion of your customers struggling with their energy bill
• Signpost and/or refer your customers to support through third parties (e.g. debt advice)
• Talk through how to maximise their income
• Promote your support schemes and how to access them
• Help them to resolve any debt with you directly through a warm transfer

An impartial service that can bridge the engagement gap

Ofgem’s ability to pay principles make clear the need for energy providers to proactively engage their customers struggling with their energy bills. The stress and anxiety that comes with debt means that many of these customers won’t take proactive steps themselves.

We want to support you to engage more of your customers eligible for the support you offer, and the raft of support available from other sources too, like Pension credit or the winter fuel payment.

Millions of households are struggling with their energy bills now, and will be into the year ahead, so now is the time to do all we can to reach as many households as possible.

If you’d like to learn more about how ReachOut can help you in your efforts to provide support for your customers, please get in touch.

About the authors

This blog has been co-authored by Sigma Connected’s director of utilities, Rob Sawle, and colleague Jonathan Shaw, our ReachOut partnership manager. For further information or a wider discussion, readers can connect with them via LinkedIn.