As the coronavirus spreads through the U.K. and social distancing rules put pressure on businesses to retain their workforce, electricity and gas utilities may soon see their balance sheets hit by measures allowing customers to defer bill payments.

The Office of Gas and Electricity Markets, or Ofgem, is steadfast on avoiding any supply interruptions. "It is critical that customers remain on supply," a spokesperson told S&P Global Market Intelligence on March 16. The watchdog has written to all utilities, requesting them to plan for leniency policies early. "Suppliers should continue to identify vulnerable customers and work to ensure their needs are met. This includes taking a proportionate approach to debt recovery and late payments where appropriate," the spokesperson said.

Retail electricity and gas providers are already taking steps to heed the regulator's demands. "There's not going to be any interruptions to the supply coming into homes," a spokesperson for trade association Energy UK said.

EDF Energy (UK) Ltd., the U.K. arm of French power giant Electricité de France SA, told S&P Global Market Intelligence that it was prepared to offer affected customers additional support and flexibility. "Each case would be looked at on an individual basis," a spokesperson said, but support measures could include allowing repayments to be made over a longer period, or delaying payments for a short time.

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British Gas, the retail business of U.K. utility Centrica PLC, is looking at similar leniency measures. The company told S&P Global Market Intelligence that it will allow late bill payments on a case-by-case basis.

Such measures will come at a financial cost to the suppliers. "There will be inevitably an effect on the bottom line if there are increased amounts of payments being deferred etc but it’s impossible to quantify," the Energy UK spokesperson said in an email.

One complication is that 4.3 million consumers in the U.K. access power and gas via prepayment meters, according to customer website Uswitch. These tend to be found in housing estates operated by local authorities, and residents often earn lower incomes. For utilities, the system helps avoid late bill payments.

Smart meters allow prepayment customers to top up their gas or electricity online. But those without smart meters are forced to top up in person at kiosks or post offices.

A traditional pay-as-you-go electricity meter and gas card. Source: S&P Global Market Intelligence

For many, the journey to the nearest top-up station has become longer in recent years. The growing number of smart meters and the rising cost of operating top-up machines has led to a decline in the number of outlets able to top up power and gas cards. A switch of payment operators at the beginning of the year left customers with another 15,000 fewer outlets across the country, according to customer information website MoneySavingExpert.

Additionally, once elderly or other vulnerable people are asked to self-isolate to avoid catching the coronavirus, which the government said was imminently, they may have to rely on others to top up their meters. "Customers who have self-isolated may want to arrange for a trusted person to help them and take their top-up card to the shop," the Ofgem spokesperson said. That said, not everyone will be able to top up large sums upfront to see them through a long period of isolation.

EDF is recommending prepayment customers ask for help from friends or family. If that is not possible, the company is also able to issue top-up cards preloaded with credit, which will be recouped later.

British Gas also highlighted its emergency credit policy for such households. "Customers with a traditional prepayment meter can access emergency credit on their meter — which may provide enough energy for them to see out some of the isolation period," the company said.

This emergency credit is usually £5. When running the heating, that will likely deplete within a few days — something that British Gas acknowledges. "There will [...] be many customers who will need additional support — for example if they believe they will exhaust their emergency credit before their isolation period ends," the company said in an email. Those customers are asked to get in touch and "we'll work with them to find a solution."

Part of the solution could be the U.K. government's "whatever it takes" emergency coronavirus package, which will see over £350 billion in government-backed loans and grants injected into businesses, with the aim of preventing bankruptcies and layoffs.

European perspective

Across the rest of Europe, central governments have already promised payment relief for households unable to foot their power bills as economic activity slows down. French President Emmanuel Macron has announced a €300 billion emergency fund and that utility bills will be "suspended" during the crisis so that nobody would be without supply, Euronews reported, and the Italian government announced similar measures.

German utilities association BDEW said any assumptions around job losses and lower income in the country as a result of the virus are currently "very speculative" and therefore it was too soon to estimate any impact on bills for its members.