Retail reset
Andrew Ward, chief executive of Scottish Power UK retail, warns that we have one opportunity to reset energy debt before it becomes “completely unmanageable”.
By Rob Hakimian, news editor
Retail reset
Scottish Power CEO of UK retail Andrew Ward warns that we have one opportunity to reset energy debt before it becomes “completely unmanageable”.
By Rob Hakimian, news editor
With 35 years in the energy retail sector, all at Scottish Power, when Andrew Ward says that we have “one shot” to fix the sector’s insurmountable debt pile, we should listen.
Now Scottish Power CEO of UK retail, Ward warns that “if we don’t take an intervention right now, debt will become completely unmanageable”.
Ward is speaking shortly after Ofgem’s revelation that energy debt in the UK had risen £240 million in the first quarter of 2026 to a new record total of £4.79 billion. This was followed by analysis from Baringa that said the total debt is trending towards £7 billion by the end of 2027, which will put an additional £100 on average annual household bills – almost double the £55 that is currently being paid by a standard dual fuel household.
Ward’s answer is a one-off reset, moving households that cannot afford to pay on to a social tariff, and securitising around £1.6 billion of their historic debt so it can be cleared from individual accounts and repaid gradually across the customer base. This, however, will only work if it is paired with structural reforms, including better data sharing, improved use of smart meters and changes to tenancy rules.
From call centre to CEO
Having started in Scottish Power’s call centres and spent countless hours directly speaking to customers in every role since, Ward’s overriding concern is for those who are truly struggling under the weight of unpayable bills.
UK energy debt is set to hit £7bn by 2027, according to analysis from Baringa
“I have spent my career focusing on customers; I’ve visited many domestic customers in their homes, business customers in their premises – and I still speak to customers now, so I would say I’m well in touch with what’s actually happening across the UK,” he says. “But never in my wildest dreams did I think we’d get an energy debt pot of anywhere near £7 billion.”
What he’s seen is a system that had a “difficult structure but worked” when he came into the CEO role in 2017 and has been through three price shocks since, with Covid-19, the invasion of Ukraine and the war in Iran. This has fundamentally changed the retail landscape.
“What happened with Ukraine was absolutely existential in terms of energy price – unprecedented on a different level altogether,” he says. “We’ve not seen the same impact from the Iran crisis but we have seen an increase occur in the price cap that’s just been implemented.”
Ward says that Scottish Power has been engaging with its customers over the past decade through these shocks and “there are people that we believe simply can’t afford to pay for their debt and they’re struggling to pay for their ongoing consumption”.
It has also been engaging with Ofgem about measures to mitigate the issue of bad debt, with Ward saying the feedback has been positive but action has yet to be taken.
The first step to helping these customers would be accurately identifying them. “It would be a lot easier if we had access to the Department for Work and Pensions data that we’ve been asking for several years now,” Ward says. “Along with the affordability data we’ve got, that would give us a really accurate picture in terms of people who can and cannot afford to pay for their energy.”
They could then be moved onto a social tariff to prevent racking up further arrears.
“It would be a lot easier if we had access to the Department for Work and Pensions data that we’ve been asking for several years now.”
Role for banks
Once these customers have been appropriately identified, Scottish Power is proposing that the debt built up by them – estimated at around £1.6 billion, one third of the current debt pile – be ringfenced, securitised and sold to banks. This would still have to be repaid by energy customers, but could be spread over a decade and would bring the average addition to annual bills below £10, according to the company’s calculations.
“If we involved the financial institutions and they fund that debt, the energy companies are paid and it immediately comes off the customers’ account,” Ward says. “We spread that debt over a longer period and it’ll be less than £10 that will go onto everybody’s bill.”
The people whose debt is cleared could then be saving hundreds of pounds a year on their account. “The government has an opportunity, through securitisation, to lift some people in the UK out of fuel poverty and give them a fighting chance to pay for their energy bills,” Ward says.
This approach has been used successfully elsewhere, including in Spain where Scottish Power’s parent company Iberdrola operates.
The retailer also believes that banks would be willing to do this. “Coming out of Covid we looked at a similar type of mechanism and at that point there was a definite appetite from banks to do this,” Ward says.
Structural reforms
An action like Ward’s securitisation plan would be a one-off and would require several other market reforms in order to prevent the debt pile from building up again. A priority area would be to overhaul rules around energy supply when moving house. This is an issue wherein people who move into a new home don’t inform their supplier that they’ve taken up a new residence and, by the time they do, their debt has piled up. It is believed that another third of the current debt pile is due to this.
“At Scottish Power we have an average of 52 days before somebody tells us they’ve moved into a new property,” Ward says. “And some people don’t tell us for four or five months that they’ve moved.”
In countries including France, Italy, Spain, Portugal, Brazil and USA, the property is disconnected when a change of tenancy takes place. Using smart meters, Scottish Power is successfully implementing the same approach among its customers.
“This was part of the original business case for smart meters, which is to ensure that people actually notify us that they’ve moved into a property and if they don’t then there’s no credit in the meter,” Ward says. “It works very well and we’ve said to Ofgem that this is the process that should be adopted by every single energy company in the UK; there’s no reason why they can’t.
“We’re saying to Ofgem ‘we would love for you to roll this out; we would love you to communicate this to suppliers’, because it is an absolutely fundamental principle of how we avoid debt growing any further in this country.”
Another benefit of engaging a new home occupier when they move into a new property is the ability to ensure that they are on the right tariff for their needs. “For some people that move into a property that might be struggling to pay, we miss a huge opportunity to talk to them about support services,” Ward says. “We’ve got great links with organisations like Citizens Advice and Step Change where we could refer them to get some additional support, but currently we’re missing this opportunity.”
Scottish Power has also been engaging with Ofgem on reforming billing processes to slow the build-up of energy debt.
Energy companies prefer bills to be paid via monthly direct debit as it ensures a steady cash flow – which is also beneficial for the consumer – and reduces administrative costs. However, higher volumes of customers are defaulting from direct debit than ever before, which is down to two reasons according to Ward. First is that people do not have the funds in their account to pay the debit and second is they are proactively cancelling their direct debit.
However, when this happens, they are not helped but are in fact put on to a more expensive tariff.
“The problem is that the current UK regulatory process demands that I default them to a quarterly cash payment – the so-called ‘standard product’ – which is a more expensive tariff than direct debit,” Ward explains. “It’s the most expensive tariff because when you look at the cash base, you’re paying for your debt in arrears and it’s got one of the poorest collection chances, therefore companies reflect that in the price.”
Scottish Power believes defaulting customers to quarterly cash is wrong, especially if they’re clearly struggling to pay their energy bills. “It’s just a silly way to look at this market,” Ward said. “We’re not really reflecting what we should be doing for the best outcome for the customer.”
Instead, Scottish Power believes these customers should be defaulted to a cheaper tariff using a pay-as-you-go system enabled through smart meters. Ward says the company is currently in discussions with Ofgem about mandating this approach across the market.
“This is another huge change that the market could make,” he says. “It’s within Ofgem’s gift to do this; it will help customers for the future, and it will help avoid increasing debts as people try to figure out what they’re going to do.”
Ward is passionate about bringing forward these measures to help individuals and households that he’s “really worried about”.
“At the moment we’ve not got the mechanisms to engage those households and that’s what I’m struggling with,” he says.
Can pay, won’t pay problem
Another concern of Ward’s is that, since Covid, there has been a cultural shift around the necessity of paying energy bills.
“The number one problem we’ve got now is we’ve developed into a country where it has become, dare I say it, almost acceptable for some people not to pay their energy bill,” he says. “And that’s a challenge because what we then see is energy companies like ourselves struggling to get people to engage and to actually think about their energy and how they’re paying for it.”
He also references the “completely unacceptable behaviour by certain individuals when trying to collect debt”, which changed the regulatory and governmental approach to installing prepayment meters.
“I can understand why the reaction happened, but I think we went too far with the intervention and, as a result, we’ve now created a different context for the UK in terms of payment,” he says. “The design of the UK market several decades ago had prepayment as a cornerstone to help us understand how to control energy use in the household and it’s always been a really good mechanism to help people budget and understand how their energy needs are developing every day.”
Now that smart meters are being rolled out – over 70% of UK households have them – he believes it is time to use their capabilities to help reset the culture too.
For Ward, securitisation of bad debt coupled with these market interventions through smart metering is the only way to stop the sums mounting and it has to be done as soon as possible to stop the situation from cascading – or, worse, the market potentially suffers another shock.
However, Scottish Power is clear that it has to be made clear that this is a one-off intervention to help people who cannot pay to reset – it can’t be eked out over many years with bite-sized interventions that convince people that there’s more help coming around the corner.
“Ofgem was trying to implement a debt relief scheme, which would almost be phase one to securitisation and we’re just saying let’s do it all in one and get on with it,” Ward says. “We’ve got a change in government, and the new prime minister has already intimated that he intends to help customers across the UK that need this sort of help.
“Well, this is an ideal mechanism for it.”
“Ofgem was trying to implement a debt relief scheme, which would almost be phase one to securitisation and we’re just saying let’s do it all in one and get on with it.”
