Market debt levels continue to rise with prices

Market debt levels have continued to rise as the the price cap rises - however we've also seen customers absorb a greater proportion of the price increases than expected. This isn't all good news - we're potentially starting to see a latent effect where customers are running out of options by which to cover the increased costs which will give rise to increased debt levels in Q4-23 / Q1-24.

The use of Pre-Payment meters for debt purposes has recently been a hot topic. As well as the need for customers to access electricity and gas, suppliers have a duty to customers to help prevent debt - in our Financial Services practice we see the FCA having specific Consumer Duty rules to act in good faith and deliver good customer outcomes - which includes preventing debt build up.

Benchmarking suppliers current approaches to Pre-Payment debt management shows a significant spread across suppliers and fuels.

Pre-Payment self-disconnections are rising in line with price rises - which won't come as a surprise to people. The concern is that customers are now more than ever having to choose between heating and eating.

Debt repayment lengths appear challenging for a number of suppliers, and when the average repayment length for an energy debt is ~10 years, we have to ask "Is this really the best outcome for the customer?"

Interestingly the spread of average instalment amounts is much tighter - this is likely a policy decision, or suppliers playing it safe.

However we're also seeing some suppliers clearly having much higher debts at the point of Pre-Payment meter fit - indicative of either a challenging customer base, or lack of efficiency in early stage collections and customer engagement - which gives rise to greater debt build up.

What is paramount at this time is improving customer outcomes through highly skilled people, better performance management, and improved processes.

Read more about our work on Customer Debt Management [here]