Just how much do bad debts cost energy companies?
Well, the question really worth asking is: ‘How much do other people’s bad debts cost you?’
There’s been a lot of press about bad debt in the water sector and how much this costs us all. Unpaid debts mean that the average water consumer pays an extra £15 a year.
In the energy sector the scale of the problem is even greater. Debtors accounted for approximately five per cent of UK energy customers in 2008 and it is likely that this figure has risen substantially since then as the recession has continued to bite.
Obviously all energy companies pursue bad debtors and seek payment where possible, but often these individuals move on and change energy supplier, making it very difficult to track them down.
With so many debtors slipping under the radar energy companies currently pass the cost of all this debt onto the customers who do pay, which is downright unfair.
The injustice of this got us thinking and we’re currently debating whether energy companies should be able to share data on debtors with one another.
This would put a stop to the cycle of debt dodging by changing address and switching supplier and in the long term it should help to reduce overall debts, which would in turn reduce energy costs for the honest majority.
We believe that this kind of debt database could operate in a similar way to existing credit referencing systems, sending a clear message that failing to pay energy bills will have real consequences.
The installation of pre-payment meters for those with a history of debt would mean they wouldn’t be left without energy and would also prevent the accumulation of energy debts in the future.
It would also act as a deterrent to those who can pay their bills but who choose not to because they believe they will get away with it. This is a particularly common problem amongst students and young professionals, as the pattern of short term lets and changing households can make it very ifficult to track debtors down.
People who pay their bills shouldn’t be making up the shortfall for those who don’t and the creation of a ‘debt database’ appears to be the only way to put an end to this unfair status quo.
We would love to hear what you think so please feel free to leave your comments below.