Prepayment meters: new safeguards against forced installations introduced

Published 29/04/2024   |   Reading Time minutes

Early last year, it was exposed that energy companies were force-fitting prepayment meters (‘PPM’), as customers struggled to meet the rising cost of energy. Whilst the practice was frozen in February 2023, some energy companies have been allowed to begin again, albeit with new rules in place.

Our previous article looked at what PPM are, who they are affecting, and the rate at which they were being forcibly installed. Ahead of a Plenary debate on 1 May, this article looks at what has happened since.

Petition calls for an inquiry into the ‘scandal’

In response to a petition on the subject, the Senedd’s Petitions Committee undertook an inquiry into what the petitioner described as the PPM ‘scandal’ in Wales. The Committee’s report, A Warmer Winter, made a number of recommendations to the Welsh Government and Ofgem around support and protection for customers, data sharing and introducing a social tariff.

Both the Welsh Government and Ofgem accepted the Committee’s recommendations, and set out the steps taken to protect vulnerable customers from forced PPM installations.

Ofgem introduces new ‘code of practice’

Initially introduced in April 2023 as a voluntary code, the Ofgem ‘involuntary PPM code of practice’ became mandatory in November 2023. It sets out that suppliers must refrain from all involuntary installations for the highest risk customers e.g. households requiring continuous use of medical equipment, home to children under 2, or where all occupants are over 75.

The code also establishes rules about minimum number of contact attempts before a PPM is involuntarily fitted, installers wearing body cameras during visits, and an obligation to re-assess once debts have been paid. Ofgem says it intends to periodically review the code of practice to ensure it is protecting the most vulnerable.

Freeze on force fitting PPM lifted

Ofgem is not able to completely ban PPM, or ban them indefinitely. As such the moratorium on involuntary PPM installations was always a temporary measure. Energy suppliers have a statutory right to apply for a warrant to install PPM for collecting debt - changing this would require UK Parliament legislation to be introduced.

However Ofgem does have powers to modify the licence conditions of energy suppliers, which can be used to control the involuntary installation of PPM. It has done this by modifying all standard gas and electricity licences to include the conditions set out in the code of practice.

In January Ofgem announced that three energy suppliers had met its conditions, and were able to restart involuntary installations as a last resort. Ofgem says it is “approaching supplier restart cautiously” and has been “explicit about the rules in place and our expectations on suppliers”.

Compensation payments delay

Energy suppliers have been reviewing customers who had PPM involuntarily installed between 1 January 2022 and 31 January 2023, to identify those eligible for compensation.

Ofgem says suppliers are assessing 150,000 involuntary installations, and that so far (as of 3 April 2024) 1,502 customers have received compensation, totalling £342,450, with plans for further payments of around £200,000 for 1,000 more customers. Updated figures will be available in June 2024. The UK Secretary of State for Energy Security and Net Zero, Claire Coutinho MP, is reported to have said the small number of compensation payouts is "completely unacceptable".

The BBC recently reported that British Gas, the energy supplier found to be forcibly installing PPM in vulnerable customer’s homes, is not included in these compensation figures, but is subject to a separate, ongoing investigation.

Ending the prepayment premium

Customers who pay by direct debit have traditionally been offered cheaper tariffs, meaning that energy has historically been more expensive with a PPM.

It was announced in July 2023 that the ‘prepayment premium’ would be eradicated. Initially this was funded by the UK Government through the ‘price cap’ – where Ofgem is able to limit the cost per unit of electricity and gas, as well as put limits on the standing charge for each, and re-evaluate periodically.

The UK Government paid for a lower cap for customers on PPM until April 2024, after which Ofgem is putting measures in place to permanently stop the PPM premium. In February Ofgem published its decision on how it will adjust standing charges to “make payment methods more equal or equitable (but less cost-reflective)”.

Calls to protect vulnerable customers through a social tariff

A social tariff is a discounted energy bill for certain groups, for example those with lower incomes or specific needs. In the UK Government’s November 2022 autumn statement, it announced it would take a “new approach to consumer protection from April 2024” with regards to energy, and would “consider the best approach, including options such as social tariffs”. Campaign groups wrote to the Prime Minister in September 2023 to highlight that this is yet to happen.

The Petitions Committee recommended that the Welsh Government support the creation of a new social tariff for vulnerable people. Whilst this has been accepted by then Minister for Social Justice and Chief Whip, Jane Hutt MS, she says she “met the UK Minister for Energy Consumers and Affordability in November… and despite warm words, there was no firm commitment on a consultation or announcement”.

Article by Lorna Scurlock, Senedd Research, Welsh Parliament