Big switches leaving a trail of debt

WITH MONEY getting tighter and people across all social classes struggling to make ends meet, more and more people are falling into arrears on their utility bills. Before they reach the disconnection stage, thousands are simply switching from one provider to another and leaving their debt behind.

It is a peculiar anomaly of the Irish gas and electricity market that suppliers have no legal authority to check the history of someone switching provider, so it’s quite easy to debt hop. Although the companies have the right to pursue these debts in the courts, and can employ debt-collection agencies to recover the money, once the relationship is fractured to such an extent that a customer walks away the ultimate sanction of disconnection loses all power and recovering the debt becomes largely impossible.

A customer could quite easily move from the ESB to Bord Gáis Energy to Airtricty and then back to the ESB – and the latter has to take them back under its universal-service obligations. The customer would then have to enter a payment plan for the outstanding debt, but they could not be denied power because they were a bad risk.

“Unrestricted debt hopping affects all suppliers in the market,” says Larry Donald of Bord Gáis Energy. “A mechanism for ensuring that customers can not walk away from debt is critical.”

Brian Montayne of the ESB agrees. He says the company is losing between 5,000 and 6,000 customers a week, many of whom are leaving debt behind. It has a rolling debt of about €14 million. He says the debt write-off last year was €20 million, with €15 million of that accounted for by domestic users. “Our margins are 1.3 per cent, so if you write off €20 million you have effectively written off your entire margin.”

The issue of changing the rules to allow energy companies see the credit history of customers who are looking to switch providers is exercising the minds of the utility firms, but a resolution is not expected in the short term.

Last year about 150,000 customers of the ESB entered into payment plans, while a similar percentage of customers with Bord Gáis Energy and Airtricity did likewise. Even payment plans that are agreed by people struggling to meet their financial commitments are frequently broken – Bord Gáis Energy say 75 per cent of its payment plans are breached.

About 2,500 people were cut off from one of the most basic of services each month in 2010 by all three providers, and about 10 per cent of all households are currently in arrears.

We have been here before. During the bleakest period of the 1980s, fuel poverty, arrears and disconnections were widespread but there is one major difference this time. Back then, arrears and disconnections affected only the poorest people in society.

“In the 1980s it was a major issue, but it was not the same kind of problem,” says Donald. “Now utility debt crosses all social divides, and middle-class households are just as likely to be affected as those living in social housing. One of the problems we have is that sometimes we can’t get through the electric gates to make disconnections.”