How can PAYG solve the energy debt crisis?

Avoiding and managing resident debt, especially in relation to energy bills, has been high on the agenda of the property sector for some time. And as the cost of living continues to rise, a growing number of residents are experiencing debt for the first time. A report by the ONS (source, 2023) revealed that almost half of adults (49%) who reported that they were behind on their energy bills also reported high levels of anxiety. 

On the other hand, for property managers, it’s never been more important to better manage and ultimately avoid falling into debt. For those serving a heat network, which supplies heating and hot water from a central source to consumers via a network of insulated pipes, energy debt can be a growing burden. 

In traditional gas and electricity markets, which are fundamentally much larger than heat networks, customer debt can be absorbed by the hundreds and thousands of customers energy companies have, and those in positive balance. The debt issue is compounded by the fact that heat network owners are responsible for the entire system over a prolonged period, often multiple decades. Large debt problems make it more difficult for heat suppliers to maintain the network as further time and resources are needed to encourage residents to pay off their arrears. In some cases, if debt becomes too high, they may not be able to pay the incoming fuel bill putting all properties linked to the heat network at risk of being cut-off.


But for property managers already juggling a large array of responsibilities, and now more worried than ever about the issue of debt and how to help their residents avoid or better manage it, the good news is that there is something they can do about it.

Is PAYG the answer?

As the name suggests, pay-as-you-go (PAYG), also known as prepayment, is a metering and billing solution that requires residents to pay for their heat before using it. This is achieved by heat interface units (HIUs) containing prepay valves that shut when a resident’s account balance falls below a certain credit limit (usually £0.00). Supply is then restored when the customer tops up their account or uses emergency credit. Like smart meters installed in homes with traditional gas or electricity boilers, a web-app or physical in-home display (IHD) informs residents of how much energy they have consumed over different periods of time. 

For residents and property managers alike, there are numerous advantages to adopting a PAYG system when it comes to managing debt.

Less consumption means cheaper bills

Perhaps the biggest advantage of all is that PAYG users typically consume around 20% less energy than those on credit billing. 

These savings are even greater when using a digital PAYG system. Data from our own PAYG web-app, KURVE, shows energy consumption drops even further when residents can access their account on the go. Whenever and wherever they are, they can make payments, set-up automatic top-ups, receive email balance notifications, and monitor their energy usage. This was seen with 95% of our residents saying they felt positive about the KURVE web-app in a 2022 user experience survey. 

Between April 2022 and March 2023, we found that KURVE PAYG users consumed 886 kilowatt-hour (kWh)/property less energy (24%) than their credit billing counterparts. In monetary terms, this equates to an annual saving of £121.17 per residential account, a notable amount given the current inflationary landscape. Interestingly, in colder periods – a time when residents are even more likely to keep track of their heating use – our data shows even greater energy savings of 26%.

This is great news for those property managers with debt on their minds. For example, if energy savings of 24% were applied across a scheme of 100 units, it would translate to approximately 89 megawatt-hour (MWh) less energy that needs to be purchased every year. 

Help where it’s needed most

At a time when a staggering 92% of UK households claim their cost of living is on the up (source), another particularly important feature of PAYG systems is the added support available for vulnerable residents. 

Unlike with credit billing models, where residents are largely unaware of how much energy they are using - often until they receive a potentially worrying bill at the end of the month - PAYG allows additional support, such as emergency credit, to be provided to those who need it in real-time before debts grow even larger. 

Protecting providers too

It’s not just residents that PAYG stands to protect. As mentioned earlier, the financial viability of a property’s heat network can hinge on a customers’ ability to pay bills. If more and more people fall into arrears, housing providers on credit billed sites are forced to absorb the increasing costs of unpaid (and expensive) energy bills, meaning their own level of debt continues to rise.

In contrast, debt on a digital PAYG system should always trend downwards due to the self-disconnect function. Debt balances can also be recovered using debt recovery rates set as a percentage (e.g., 25%), meaning whenever a customer tops up (say £10, for example), a proportion of their payment goes to pay off their debt (£2.50) while the remainder (£7.50) will go to their account balance, so they have continual access to their heating while gradually paying off their debt.

Debt – driving a changing landscape

Combining all of these benefits, we have seen that customer accounts that are on KURVE have 88% less debt than those on credit billing. This equates to an average KURVE PAYG account have a debt of £33 compared to £639 on traditional credit billing – a staggering difference. 

So, if the good news is that there is something property managers can do about energy debt, the great news is that a growing number are already doing just that.

A decade ago, 80% of the housing associations and private developers we worked with were adopting credit billing systems, with only 20% operating PAYG. Fast forward to today, and the landscape has flipped, with now a rough 80-20% split in favour of PAYG. It’s a shift we predict will continue to gather momentum.

And when we look to the future, towards another emerging trend within the heat network market – the concept of self-owned heat networks – PAYG is, once again, an ideal fit. Unlike credit billing, these community-owned networks are conducive to PAYG systems, as they incentivise residents to act as though they own the heat network, with lower debt equating to lower costs for every resident involved. Once again this is about handing over control – this is crucial to managing debt more effectively, and PAYG is an important facilitator.

However far into the future we look, the fact remains that the trend towards PAYG therefore continues to strengthen, and, crucially, at a time when its benefits are needed most. And as smart, digitised platforms offer new advantages to be gained it’s just the trend property managers, and their residents alike, need. 

Ellie Blacklock, Head of Digital Solutions, Insite Energy



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