This article was written in 2011 and may contain out of date information. Browse more recent articles.
The highest level of energy disconnections ever
That was how the Commission for Energy Regulation’s latest publication was reported in the news. Taken on it’s own, that’s a pretty damning indictment of everything from sky-high energy costs to unemployment and higher taxes.
It seems that people just can’t pay their most important bills anymore. And so there were 2,901 gas and electricity disconnections in August. That’s nearly 100 a day, and I have no doubt that behind each of these disconnections are stories of real hardship.
On the back of these figures, the CER’s has said that they are looking into the disconnection processes for all suppliers. They will report on this in December, but we already know that suppliers do not disconnect in the same way. In fact, customers with one supplier are six times more likely to be disconnected than customers with another.*
The CER has published a heck of a lot more than just August’s disconnection figures though. They gave us some very interesting historical information that paints a pretty clear picture of how the market has completely changed over the last couple of years.
Electricity deregulation has been around since the boom days, but Irish households really only had a choice of suppliers when Bord Gais launched their Big Switch campaign in February 2009. They had such a huge response to their discount prices that they simply couldn’t keep up. It took them until the summer of that year deal with the backlog of switchers. Then in July 2009 Airtricity launched and things really heated up.
With customers able to switch suppliers and better prices available, you’d reckon that disconnections would fall and, in 2009 they did. But then disconnections climbed alarmingly. Even when the economy is taken into account the sheer size of the increase is surprising because in Ireland if you rack up an arrears with one supplier, you can simply switch and start off on a clean slate with another supplier. Debt hopping is what it's become known as.
Back in the days before the Big Switch when there was only the ESB, disconnections trundled along at more or less the same rate month after month, year on year. Between January 2007 and January 2009 the average number of electricity disconnections was 909 per month and trending downwards. The highest number of disconnections was in July 2008 at 1,212 and the lowest was in December 2007 at just 268 - although that can be explained by the ESB’s policy of keeping the lights on over Christmas.
Then everything changed. 2009 brought new suppliers and cheaper prices and we were mad for it. We switched away from the ESB in our hundreds of thousands. With all the activity it took some time for the dust to settle and disconnections in 2009 fell to an average of 809 per month.
The fall in disconnections in 2009 can be explained easily enough though. The two new suppliers were starting customers from scratch and in most cases had no knowledge of their previous billing history. They had to find out for themselves whether people were payers or not - and that takes time. Customers usually have to fall behind by three months or more before they are cut off. And of course, many customers that were behind with the ESB just switched before they were disconnected.
Then in 2010 disconnections jumped by 72% to an average of 1,390 per month. It almost defies explanation that disconnections could increase by such a staggering amount in just one year. But according to the CER, that’s exactly what happened.
2011 saw the numbers increase even further. So far this year we’re running an average of 1,472 disconnections per month. That’s 62% more than the pre-deregulation years when prices were higher and there was just one electricity supplier. And compared to 2009, disconnections are up by an almost unbelievable 82%.
For customers that fall behind, disconnection is not inevitable though. There are payment plans, and ways to stay connected, but all suppliers say the same thing. You must engage with them once your account falls behind or you will be disconnected.
There are also pre-payment meters, but in reality ESB Electric Ireland is the only supplier that installs these in any real numbers and customers have to be in arrears of around €3,000 to get one – and having one installed is not usually voluntary.
However all is not lost. Customers who want prepayment meters can actually get new digital ones from PrePayPower – a small energy company that sells domestic electricity on a prepay basis only. They are a bit more expensive, but report growing numbers of customers signing up because they want to be able to budget their electricity costs better.
The bottom line though is that disconnections will probably remain much higher in a deregulated market. Sadly, it is the commercial reality of competition.
*Bord Gais Energy has a monthly disconnection rate of approximately 3/10,000.
ESB Electric Ireland has a monthly disconnection rate of approximately 6/10,000.
Airtricity has a monthly disconnection rate of approximately 18/10,000.
Source CER Electricity and Gas Customer Disconnections Report CER 11/822