Energy suppliers in the UK will now have the option to defer their network payments. These changes will come into effect in the hopes of protecting both providers and customers during the coronavirus pandemic. COVID-19 has created great uncertainty and many customers are facing financial difficulties as a result.
The scheme, which is worth more than £350 million has been designed by the energy networks through the Energy Networks Association (ENA). This was after a request from industry regulator, Ofgem.
Ofgem has been closely monitoring the effects COVID-19 is having on the industry as a whole, in addition to the challenges customers and suppliers face. This will be to provide support to those who are having cash flow problems, ensuring that firms are still viable and are not forced to leave the market, which could negatively impact users of gas and electricity. There is a large choice of energy providers in the UK, this competition has benefited consumers through offering lowering prices and better customer service.
An open letter was published at the start of the previous month, and an agreement has taken place between the network companies. The scheme will be applicable for a three-month period, additionally, it will be only available to companies that do not have an investment grade credit rating. Any deferred payments must be repaid in full by the end of the current financial year, March 2021.
It’s also important to note that the deferred payments must be calculated correctly and will differ from company to company. This is to ensure these late payments do not negatively affect a network’s ability to fulfil its credit metrics and financial commitments. Should a network company fail to abide by the terms and conditions set out, the regulator will be able to withdraw the scheme.
Each provider must consider their own business circumstances before joining the scheme, this facility should only really be used when all other options have been exhausted. Ofgem will monitor the scheme to ensure that it is not being abused.
Ofgem’s CEO, Jonathan Brearley said in a blog post: “We expect companies to be ambitious in restoring their standards of customer service and business as usual activities as quickly as possible.” Brearley adds that Ofgem accepts there will still be challenges and exceptions, and urged companies to follow government guidance for the safety of staff and customers.
This new facility was made available after the regulator consulted with energy networks, electricity generators and suppliers earlier in April, in an effort to tackle the coronavirus pandemic.
David Smith, chief executive of Energy Networks Association, said: “We are continuing to keep Britain’s energy flowing during the COVID-19 pandemic and offer support to customers, especially those who are vulnerable.”
“The networks are prepared to use their borrowing powers to help ease cash flow for suppliers by more than £350 million. We want to ensure customers are protected and recognise that this exceptional measure will help do just that.”
During these unprecedented times, a range of support options have become available to citizens across the country, including the generous Coronavirus Job Retention Scheme. Many banks and building societies have also offered mortgage holidays and scrapped overdraft fees up to a certain limit. A number of car insurance companies even credited customers around £25 as many drivers across the country remained at home during lockdown.
