As energy prices soar, one of the biggest worries for directors of housing schemes running heat networks is heat debt. Many are absorbing the spiralling cost of unpaid bills, as chasing debt appears futile.
Nowhere is this truer than in the social housing sector, where households have a higher percentage of vulnerable tenants and have felt the impact of furloughing and job losses during the pandemic, making them more susceptible to falling into debt and less able to recover from it.
A comparison of two similar heat networks (for a social housing provider and a privately-owned housing scheme) for which Insite Energy provides metering and billing shows alarming differences in the scale and character of residents’ debt. The social housing scheme currently has almost four times as much debt as the private development. Furthermore, the private scheme’s figure is consistent year-on-year and is largely down to residents forgetting to organise payment; one chase and the debt is settled. The social housing residents, meanwhile, simply can’t afford to pay.
Sadly, things are set to get even tougher. Housing providers have generally been the last to increase residents’ fuel tariffs in the face of the huge price rises. Some used their buying power to secure three-year fixed rates but many of these are now up for renewal. Others have already been heavily subsidising residents’ energy bills since the pandemic, leaving them little room for manoeuvre when faced with additional price hikes.
How to help
Where do residents connected to heat networks turn for help? Often, it’s us, even though as a metering and billing service provider we have no control over energy prices. The number of tariff-related queries we’re receiving is the highest ever; our figures for 2022 are between five- and six-times higher than last year.
We’re doing all we can to provide a sympathetic, well-informed and accessible ear for residents, hopefully taking a little pressure off housing providers, but they know their residents best and they tell us that mental health is an increasingly prominent issue as financial struggles worsen.
While strategies such as open communication, emergency credit and collaboration with debt advisory services such as Citizens Advice can all help, proactive preventative action is vital.
One approach is to switch to pay-as-you-go (PAYG) metering. Despite being historically viewed with caution by housing providers, PAYG is now more widely accepted and adopted because, as well as preventing debt, it offers residents real-time energy consumption data.
Changing behaviour through data
It’s well-known that access to real-time energy usage data stimulates behavioural changes that reduce personal consumption. For example, at a development of 89 properties in South London, PAYG energy usage over four months last year was around 40 per cent lower each month compared to a similar 84-unit, credit-billed property in North London.
It’s also notable that the largest proportion (35 per cent) of page views on a digital smart-metering PAYG app for heat networks called Kurve are from residents reviewing their energy consumption, compared to 24 per cent viewing their balance or just six per cent topping up. This clearly indicates people’s interest in their energy use.
While smart-metering solutions are still viewed by some people as best suited to private build-to-rent developments with ‘tech savvy’ tenants, social housing tenants respond positively to the technology as well; a customer experience survey earlier this year (comprising 60 per cent social tenants) showed that 95 per cent of users make payments online.
Reducing expenditure
When prices are rising on all fronts, using an app minimises capital expenditure as well by avoiding the need to install in-home display units. Cutting the amount of equipment installed also significantly reduces any replacement expenditure simply because there is less equipment to replace or repair.
Good maintenance is also key to keeping costs down. Smart metering systems enable housing providers to monitor the efficiency of their heat networks in real time. This means issues can be identified remotely and targeted maintenance applied, rather than a broad-brush approach to maintenance, thereby minimising costs, disruption to residents, underperformance and wastage. Meters must also be properly maintained to ensure their accuracy; errors will inevitably drive up costs.
Poor maintenance can also increase debt. If meters are faulty, residents may not be charged for their heat. Following a repair, any unbilled usage would be added on to the individual’s account and recovered which can cause a financial impact. This can lead to increased risks of bad debt which on occasion is applied to future tariffs for recovery, an uplift typically seen of around 10 per cent. This is often unmanageable for households already struggling to pay big bills.
e no simple answers to the energy and cost-of-living crisis. Subsidising bills while losses mount up is not a long-term solution, given that no one really knows what will happen to energy prices. What is clear is that a one-size-fits-all approach is unlikely to be the answer and inaction isn’t an option either.
Don’t sit back – lean into the problem. Taking the right steps now could stand your housing developments in good stead for months and years ahead.
Gareth Copland is the group operations director at Insite Energy.
