CER Introduces Flagging System to Tackle ‘Debt Hopping’

The Commission for Energy Regulation has decided to implement a debt flagging facility within the Irish gas and electricity market to alert energy companies when customers wishing to switch suppliers already have outstanding energy bills. The flagging mechanism will apply to domestic gas or electricity customers owing €250 or more for over 42 days, and for small businesses owing €750. A figure for medium-sized enterprises has yet to be finalised. Large energy users are not included in the new regime.

The new system, designed to address concerns about ‘debt hopping’, will help energy suppliers to choose whether to or not to take on a new customer with existing debt.

The CER has been concerned that in the current difficult economic climate, customer and industry debt levels are being exacerbated by some customers’ changing supplier in order to avoid paying their arrears or to avoid a pending disconnection. Debt hopping, and indeed the high general level of debt, is acknowledged as a serious issue for the industry raising costs for suppliers and ultimately for all consumers.

The CER had considered introduction a blocking option but concluded that the flag is more consistent with an open market for both the gas and electricity retail markets.

The implementation of a flag will continue to facilitate customer choice but also empowers the energy supplier to make a commercial decision about whether they will take on a customer with existing arrears. This measure supports suppliers in undertaking appropriate risk assessment as part of the customer acquisition process.

The CER is of the view that the flag should restrict the practice of deliberate debt hopping by customers, providing an appropriate incentive for customers to address their arrears with the existing supplier and increased protection for suppliers.

The new system will be monitored on an ongoing basis by the CER and a will also be subject to a 12 month review by October 2012.

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