Guidance

A guide for energy suppliers ('Fuel Direct')

Updated 3 November 2023

What is a third party deduction (Purpose)

The third party deduction scheme is designed to protect claimants in receipt of income-related benefits. Third party deductions for fuel debt is sometimes called ‘Fuel Direct’. It is used when a claimant has arrears of essential household outgoings. Other methods to recover the debt must have been tried, for example negotiating different ways of paying and managing bills. There must be a real possibility of enforcement action before consideration is given to applying for a deduction.

It is the responsibility of the Energy Supplier to ensure their customer knows they are requesting a deduction from their benefit.

Why a third party deduction is taken (Value)

Third party deductions act as a safety-net to protect claimants when they have debts for essential household bills.

Fuel suppliers should take reasonable action to recover the arrears before applying for deductions.

The following benefits may have a third party deduction:

• Income Support
• income-based Jobseeker’s Allowance
• Pension Credit
• income-related Employment and Support Allowance
• Universal Credit – information on applying for deductions from Universal Credit

How the scheme works

We deduct a fixed amount towards the arrears. The amount is deducted from the individual’s benefit at source and paid directly to the supplier until the debt is cleared.

The benefit claimant can also ask their supplier to request an additional amount to be deducted to cover current ongoing consumption costs. This is to prevent further debt accruing and to help the claimant with budgeting.

The request to start a new ongoing consumption deduction should be made by the supplier after they have obtained consent from the claimant.

Where an individual pays for their ongoing consumption by use of a pre-payment meter, only deductions for arrears may be taken.

Once a debt is paid off, a third party deduction will usually end. In some cases where the individual repeatedly mismanages their money, a deduction may continue to cover ongoing costs.

Where there is more than one debt, we can take a maximum of 3 deductions at any one time. DWP will apply the priority order when more than 3 applications are made.

For changes to ongoing consumption, we will change the amount deducted based on the current amount used by the claimant based on a meter reading, but not for an amount based on an estimate.

Debts covered by the scheme

The types of debt covered by the scheme are rated in a priority order. This reflects the degree of risk to the individual or their family by the enforcement action that may result from non-payment. The order is:

1. housing costs for specific mortgage arrears
2. miscellaneous accommodation costs; care homes, private hospitals
3. hostel charges
4. rent arrears, including service charges
5. mains fuel costs; gas and electricity
6. water charges; water then sewerage if two debts
7. Council Tax and community charge arrears
8. fines
9. refugee integration loans
10. eligible loans

What can be included in the debt

The total debt may include any legal or other costs incurred to recover the arrears, and any re-connection charges.

Who can apply

Universal Credit

The creditor or their billing agent must apply for deductions to pay for arrears and ongoing consumption.

The claimant or their representative can apply to stop deductions for ongoing consumption of gas and electricity only.

Income-based JSA, Income Support, Pension Credit and income-related ESA

The creditor or their billing agent can apply for deductions to pay for arrears and ongoing consumption.

The claimant or their representative can apply to stop deductions for ongoing consumption of gas and electricity only.

How to apply

For Universal Credit, deductions for arrears must be in place before deductions for ongoing consumption can start. Use the Application for ‘third party’ deductions from Universal Credit. Send the completed form to the email address shown on the form.

For income-based JSA, Income Support, Pension Credit and income-related ESA, use the template provided by Energy UK. Send the completed template for income-based JSA, Income Support and income-related ESA to ESA.TPD.IN1@DWP.GOV.UK .

For Pension Credit send the template to newcastle.thirdpartydeductions@dwp.gov.uk.

The supplier must send a request to start a new ongoing consumption deduction or increase an existing ongoing consumption deduction after they have obtained consent from the customer for this.

The supplier can send a request to decrease an existing ongoing consumption deduction without obtaining consent from the claimant for this.

Personal data items

We must be able to identify the claimant from the details on the application for deductions. It should include the following where possible:

• claimant’s name
• address
• date of birth
• National Insurance number, if known, although applications will be accepted without this
• name and address of the creditor making the application
• consent for any deductions for ongoing consumption
• the AP number of the creditor
• the customer reference number
• type of benefit being paid to the claimant, if known
• amount of the debt
• any figure to cover ongoing consumption

The supplier will receive either confirmation that the deductions have been put in place or rejected by the DWP. The customer will also be sent a notification informing them that deductions will be taken from their benefits.

Minimisation, accuracy, retention and reuse of data.  

Accuracy statement   

To comply with UKGDPR, you must ensure that data provided to DWP is accurate and up to date. Should you require to update any of the above information then contact DWP on:

Telephone: 0800 169 0310
Textphone: 0800 169 0314
Relay UK (if you cannot hear or speak on the phone): 18001 then 0800 169 0310
British Sign Language (BSL) video relay service. If you’re on a computer - find out how to use the service on mobile or tablet
Welsh language: 0800 169 0207

Monday to Friday, 8am to 5pm
Find out about call charges

Data retention 

DWP will retain records of any applications for deductions for 12 months from start date. This is to keep a record of evidence to support the deduction from benefit.  

DWP Third Party Deductions Scheme does not reuse the data supplied for any other purposes.   

Purpose limitation   

The data shared is related to the processing of Third Party Deductions only. DWP will use this data to help customers clear debts accumulated for previous and/or ongoing energy usage.  

Data minimisation  

DWP does not require any further information than that listed in section 8 and no other detail should be presented. This is the minimum amount of personal data to achieve purposes for which it is being shared.  

Integrity and confidentiality of information  

DWP manages its information in line with the framework set out by the Personal Information Charter.  In accordance to agreed governance both parties will ensure all data is being shared in the most secure ways ensuring all security standards/measures are adhered to. 

Further information around how DWP handles personal data can be found in the Personal Information Charter.   

Accountability and governance statement  

DWP confirm that they can demonstrate compliance with UKGDPR data protection principles this same legislation applies to Energy Suppliers and they should be able to demonstrate compliance with this law.   

The processing covered in this document is already mentioned in the organisations existing central record of processing activities.

Consent for deductions

Most third party deductions are imposed but there are some occasions where consent is needed from the claimant.

Requests for ongoing consumption

The supplier must obtain the customer’s consent to request to start a new deduction for ongoing consumption or increase an existing deduction for ongoing consumption.

If the total deductions are more than 25% of the claimant’s benefit

DWP will obtain the claimant’s consent if the total amount of all deductions is more than 25% of the main benefit including any Child Tax Credit and Child Benefit. This applies for the following debt types:

• housing cost arrears not covered by the Mortgage Interest Direct scheme
• rent and service charges
• fuel
• water charges
• integration loans
• eligible loans

How we decide if a third party deduction is appropriate

We will consider:

• if the individual is receiving one of the specified benefits in section 2
• if there is a threat of enforcement action
• if there are outstanding arrears
• if the individual or their partner is liable for the debt - an individual or their partner will normally be liable for the debt if named on the bill; there may be occasions where we cannot make third party deductions, for instance deductions may not be made if the debt is the responsibility of a partner who has left the household
• if a deduction is in the interests of the family
• if the individual will be left with sufficient amount of benefit (10p benefit) to qualify for other linked benefits such as prescriptions, Housing Benefit and local Council Tax Reduction
• if the debt takes priority over other debts - if there are already 3 other deductions for arrears in place, we will check the priority list in section 4; if the new request is for a higher priority debt, the lowest priority deduction will be stopped
• if consent has been obtained by an energy supplier for ongoing consumption deductions

Payments

Payment is made into a nominated bank account every 4 weeks in arrears. It may take 6 weeks or longer before the first payment is received. We can take a maximum of 3 arrears deductions at any one time.

Energy Suppliers are to advise their customers that it can take 6 weeks or longer before the first payment is received from DWP and will show on their account.

Information on payment queries

Legal basis   

Legal power/gateway  

Third Party deductions is legislated for in Schedule 9 of the Social Security (Claims and Payment) Regulations 1987 and the Social Security (Council Tax) Deductions from Income Support 1993. 

Under UKGDPR the lawful basis for this processing activity is Article 6(1) (e) - Public Task. It is not expected that special categories of personal data would be shared by the supplier, but if such data is processed by the DWP when making a decision on the supplier’s request, DWP would rely on Art 9(2) (b) -  processing is necessary for exercising specific rights of the controller in the field of social security.

Energy Companies must keep records of their own processing activities making note of the legal gateway and lawful basis used, as determined by them.

The following chart summarises the rights of data subjects under the UKGDPR when public task is used as a legal basis:  

Right to:	Applies?	The Personal Information Charters/Privacy Notices apply
Right to be informed	Yes	The Personal Information Charters/Privacy Notices apply
Right of access	Yes	The Personal Information Charters/Privacy Notices apply
Right to rectification	Yes	The Personal Information Charters/Privacy Notices apply
Right to erasure	No	The Personal Information Charters/Privacy Notices apply
Right to restrict processing	Yes	The Personal Information Charters/Privacy Notices apply
Right to data portability	No	The Personal Information Charters/Privacy Notices apply
Right to object	Yes	The Personal Information Charters/Privacy Notices apply
Rights related to automated decision making including profiling	Yes	The Personal Information Charters/Privacy Notices apply

Data Controller Relationship

The Data Controller Relationship for this initiative has been determined to be ‘Controller to Controller’.   

This has been applied as the energy supplier and the DWP have different purposes to process customer data and make decisions independent of one another. The supplier will be the Data Controller and be responsible for obligations under the data protection legislation until the customer’s data is received by DWP, at this point DWP will become the Data Controller of that personal information.  

Data protection notice 

 The Department for Work and Pensions (DWP) information management policy is designed to ensure that DWP:

• retains only those documents and data which support business objectives
• saves money by reducing information storage costs
• protects against allegations of selective document destruction
• manages our information risks

DWP information management policy   

Further information  

Customers can request access to the personal information we hold about them through contacting the DWP directly. This is called the ‘Right of Access’. DWP will respond to freedom of information request obligations.  

Freedom of Information Requests can be made in writing or by e-mail.