Energy regulator vows to tackle ‘debt hopping’

THE energy regulator has vowed to introduce plans to deal with “debt hopping”, where customers switch energy providers to avoid paying their debts or being cut off.

The Commission for Energy Regulation (CER) intends to bring in a “debt flagging” facility, which will alert energy companies when potential customers are in debt with a rival company.

The CER said the move would help energy suppliers to decide whether or not to take on a customer with existing debt with a rival company. The flag will be activated when a domestic gas or electricity customer has owed €250 or more for over 42 days.

For a small business the figure is €750, while the figure for a medium-sized firm has yet to be finalised. Larger energy users are not included in the scheme and the CER said flags can not be raised to block gas customers in debt from changing their electricity supplier or vice versa.

The CER acknowledged “debt hopping” was a “serious issue” for the industry and hoped the measure would help to reduce such occurrences.

Bord Gáis welcomed the announcement but said it was an “incomplete solution” to the problem.

Bord Gáis director of retail and trading Jason Scagell said the energy supplier favoured a debt-blocking system whereby customers cannot change suppliers until arrangements for clearance of outstanding debts have been made.

“We believe that this is a fair solution that protects customers from getting into a situation where their debts spiral out of control resulting in a trail of debt being left behind with various suppliers,” he said.

Mr Scagell added there is no evidence that debt blocking hinders the proper functioning of the market or acts as a barrier to switching.

The CER said it will work with the industry to develop a code of practice on debt flagging, and to ensure that it complies with data protection legislation. It wants an interim process implemented by October 1 this year, with a full automated debt flagging system in place by January of 2013.