Energy crisis hitting some consumers harder than others

A blog post by Consumer Scotland's Energy Policy and Advocacy Manager Grace Remmington

The energy crisis has had a universal impact with almost everyone facing higher bills, but some consumers are facing even greater challenges as a result of increasing energy costs.

This autumn, Consumer Scotland commissioned YouGov to conduct a series of online quantitative surveys to regularly monitor the impact of the cost of living crisis for energy consumers in Scotland.

The fieldwork for the first of these tracker surveys was undertaken between September and October, a period which spanned the end of the last Energy Price Cap and the introduction of the Energy Price Guarantee on 1st October 2022.

Overall, the results of our first Consumer Spotlight: Energy Affordability Tracker found that 36% of consumers are not managing well financially and a majority expect their financial position to worsen further in the coming months. To absorb increasing energy costs, consumers are taking action such as rationing energy use or cutting back on other areas of expenditure. In addition, 43% said they could not heat their homes to a comfortable level because of financial concerns. This is particularly concerning given our research was undertaken before the start of winter. We have now entered a period of cold weather, making these problems even more severe for consumers.

The survey also highlighted that certain consumers are struggling more than others.

Consumers on prepayment meters are more likely to be struggling financially with 82% finding it difficult to keep up with their energy bills compared with 67% of consumers paying by direct debt or standing order. Prepayment meter customers pay more for each unit of energy they use and they also pay as they go for the energy they use. That means their energy supply can be interrupted if they can’t afford to top up their meter over the winter when their demand for heating is much higher. These customers can also face extremely difficult choices between topping up their meter or spending money on food or other essentials.

Further Consumer Scotland analysis found prepayment meter customers are also less likely to report positive consumer experiences of their energy supplier. While a substantial proportion (42%) of prepayment customers were ambivalent when asked if they would recommend their supplier to other people, it is notable that only 24% of customers with prepayment meters would recommend their supplier to others, compared to 37% of those paying by direct debit or standing order, In addition, our research shows fewer than a third (30%) of prepayment meter customers agreed their supplier made it easy for them to contact them if they needed to, compared with 47% of those customers paying by direct debit or standing order.

Another group of consumers disproportionately affected are those using electricity to heat their homes, which is typically more expensive because the unit price for electricity is higher than for gas. Seventy-three per cent of electric heating users said they were finding it more difficult to keep up with energy bills compared to last year.

Our survey also identified some groups of the population are disproportionately affected by the energy crisis, including younger people and women. A higher proportion of 16 to 34-year-olds (71%) reported that they are not managing well financially compared with 65% of the those over the age of 55. And 74% of women compared with 64% of men reported finding it difficult to keep up with energy bills compared with last year.

These findings make it clear more needs to be done for certain groups of consumers. Consumer Scotland will continue to monitor trends in future waves of our survey to help ensure the needs of all energy consumers are being taken into account. Even this first survey, however, indicates a number of consumer issues require consideration.

Support for prepayment meter customers needs to be reviewed by the UK Government, Ofgem and the industry in light of the significant affordability challenges for these consumers. Comprehensive equalities impact assessments on all energy support schemes would help identify groups that may be disproportionately disadvantaged as a result of policy changes.

The UK Government and Ofgem should work closely with industry and other stakeholders to structure the future GB energy retail market so that it is designed to take into account its impact on different groups of consumers.

Furthermore, given the findings that consumers could have a better experience of their energy suppliers, there is a need for an approach that incentivises energy companies to pursue positive consumer outcomes beyond existing compliance and enforcement powers.