Ofgem sets out prepayment meter expectations to energy bosses as EDF, Octopus and Scottish Power meet regulator’s restart conditions

Press release

Dyddiad cyhoeddi

Sector diwydiant

Supply and Retail Market

Math o drwydded

  • Electricity Supply Licence
  • Gas Supplier Licence

Energy supplier CEOs have been reminded of their responsibility to treat customers fairly when installing involuntary prepayment meters, often called ‘Pay as you Go’ meters, and that they must follow Ofgem's new rules or face tough action and fines. 

The warning from Ofgem’s Director General for Markets, Tim Jarvis, in a letter, comes as the regulator confirmed three energy companies have provided evidence and assurances that they have met the regulator’s conditions to restart involuntary installations as a matter of last resort. 

The regulator also urged households to reach out to suppliers as soon as possible if they think they will struggle to pay their bill so they can get support, and take their complaint to the Ombudsman if they are unsatisfied with the outcome. In 2023, the regulator increased the requirements on companies to proactively reach out to customers who need help and prevent debt building up. 

Ofgem confirmed today (Monday 8 January 2024) that EDF, Octopus and Scottish Power have been given permission to restart involuntary PPM installations after meeting the regulator’s set of conditions, which include conducting internal audits to identify wrongfully installed PPMs and committing to reinstating non-prepayment methods and offering compensation. Suppliers must also provide regular monitoring data to Ofgem, so that concerning trends on involuntary PPM practices can be identified early.   

The regulator also announced that if suppliers install a PPM in a property occupied by someone in the ‘do not install’ category set out in Ofgem’s Supplier Licence Conditions, and have not followed the rules in full set out by the regulator to make sure a prepayment meter is appropriate, they are expected to reinstate a credit meter within 24 hours and compensate their customers appropriately.  

Ofgem is reminding supplier CEOs that the rules must be followed to the letter to avoid a re-run of some of the practices seen last year where vulnerable customers in energy debt were being moved onto PPMs without their consent. 

Tim Jarvis, Director General for Markets at Ofgem, said:  

“Protecting consumers is our number one priority. We’ve made clear that suppliers must exhaust all other options before considering forced installation of a prepayment meter, and consumers can help themselves by reaching out to their supplier as soon as possible if they think they won’t be able to pay their bill, so payment options can be discussed. Our rules on when, and how, a prepayment meter can be installed are clear and we won’t hesitate to take action if suppliers act irresponsibly.  

“While nobody wants to see the practices uncovered last year repeated, we also know that allowing households to build up unsustainable amounts of debt isn’t the right thing to do either. Many households value the control that these pay as you go meters offer over bills and how they can help with budgeting, and suppliers must also be able to recover debt to make sure those costs don’t end up on everyone else’s bills.  

“We will continue to work closely with consumer groups and suppliers to make sure households understand their rights when it comes to prepayment meters, and will regularly review our rules to make sure they are working to protect the most vulnerable. I'd also strongly encourage consumers to make sure their personal details and circumstances are up to date with their supplier, so they can be taken into consideration if or when payment problems arise.” 

Before suppliers can restart involuntary installations, they must meet the conditions set out by Ofgem. These include:    

  • Suppliers must conduct an internal audit to identify wrongfully installed involuntary PPMs installed before the PPM moratorium (in place from February 2023) and offer compensation and a return to a non-prepayment payment method to any affected customers.     
  • The supplier must commission and conclude an independent assessment to verify their readiness to comply with the new rules. 
  • The suppliers’ Board must attest that the supplier is ready to restart involuntary PPMs in compliance with the Code, and pay redress to customers of wrongly installed PPMs 
  • If the PPM Market Compliance Review finds major concerns, the supplier in question will need to take corrective agreed with Ofgem 

Once suppliers meet the above conditions and restart involuntary PPM installations, they must also provide regular monitoring data to Ofgem, so that concerning practices can be identified early. 

Customers and consumer groups will be able to check energy suppliers that can install prepayment meters without household permission on the Ofgem website. 

While EDF, Octopus and Scottish Power can now proceed with considering involuntary PPM installations as a last resort, they will still be required to follow a robust set of rules put in place by Ofgem. These rules include:  

  • Making at least 10 attempts to contact a customer before a prepayment meter is installed  
  • Carrying out a site welfare visit before a prepayment meter is installed  
  • Refrain from all involuntary installations for the highest risk customers (the ‘do not install’ category) including: 
  • Households which require a continuous supply for health reasons, including dependence on powered medical equipment, 
  • Households with an older occupant (aged 75+), without support in the house, 
  • Households with children aged under 2 years old, 
  • Households with residents with severe health issues including terminal illnesses or those with a medical dependency on a warm home (for example due to illness such as emphysema, chronic bronchitis, sickle cell disease).    
  • Suppliers must also assess the suitability of a PPM when one of the below disabilities/characteristics/conditions is a factor:  
  • Children 5 and under, 
  • Other serious medical/Health Conditions (such as neurological diseases (Parkinson’s, Huntingdon’s, Cerebral Palsy), respiratory conditions (COPD) and mobility limiting conditions (Osteoporosis, Muscular Dystrophy, Multiple Sclerosis)),  
  • Serious mental/developmental health conditions (such as clinical depression, Alzheimer’s, dementia, learning difficulties, Schizophrenia), 
  • Temporary situations (such as pregnancy, bereavement). 

Ofgem has also recently announced a series of measures to improve supplier performance and make sure vulnerable consumers are protected, including boosted consumer standards for energy consumers.  

The new rules, which came into force last month, require suppliers to contact customers if they miss two monthly or one quarterly payment, check to see if they are struggling with bills and if so, offer support such as affordable payment plans or repayment holidays. Suppliers will also be required to publish the Citizens’ Advice ratings of their customer service so consumers can see how they compare on issues such as call wait times and quality of responses. 

Today's announcement also comes on the back of updated bad debt levels from the end of last year, which showed that the pause in fitting some PPMs had been part of the contribution to the highest levels of energy debt ever.  

To inform Ofgem’s approach to PPMs, the regulator commissioned independent research into the experiences of PPM consumers. The research participants reported a lack of communication from suppliers about what to expect during installation or how to use a PPM. A number also said they felt intimidated when installation was carried out under warrant.  

However, many respondents said it gave them control over their budget and removed the stress of receiving unexpectedly high bills based on supplier estimates. This view was expressed by people who had their PPM installed under warrant as well as those who chose to have a PPM installed. 

Notes to editors  

Helpful information for customers: 

  1. If you are in energy debt, speak to your supplier as soon as possible to come up with a repayment plan, this can avoid reaching the point of an involuntary PPM being fitted. 
  2. If your supplier has written to you, letting you know that they are going to install a PPM and you do not want this to happen – check if you are included in one of the ‘do not install’ categories and if so, contact your supplier to inform them of your circumstances. 
  3. Even if you are not in one of these categories, and are worried about paying your bills, you can still contact your supplier as you may be able to arrange an alternative course of action such as a repayment plan. It is always better to speak to your supplier rather than ignore their calls or letters.  
  4. Find out more information on the Ofgem website at Energy advice for households

Ofgem's involuntary prepayment meter decision

Ofgem’s Involuntary PPM Code of Practice. 

The Prepayment meters consumer guidance lists conditions that must be met before a supplier can move you onto or install a prepayment meter.

Check which energy suppliers can install prepayment meters without household permission.  

Before progressing with an involuntary PPM installation, a supplier must:  

  • Make at least 10 attempts to contact a customer before a prepayment meter is installed, 
  • Carry out a site welfare visit before a prepayment meter is installed  
  • Refrain from all involuntary installations for the highest risk customers including: 
  • Households which require a continuous supply for health reasons, including dependence on powered medical equipment, 
  • Households with an older occupant (aged 75+), without support in the house, 
  • Households with children aged under 2 years old, 
  • Households with residents with severe health issues including terminal illnesses or those with a medical dependency on a warm home (for example due to illness such as emphysema, chronic bronchitis, sickle cell disease),    
  • Where there is no one within the household that has the ability to top up the meter due to physical or mental incapacity.   
  • Include consideration of the below disabilities/characteristics/conditions, alongside the precautionary principle in making their assessment of safe and reasonably practicable:  
  • Age: Children 5 and under,  
  • Other serious medical/Health Conditions (such as neurological diseases (Parkinson’s, Huntingdon’s, Cerebral Palsy), respiratory conditions (COPD) and mobility limiting conditions (Osteoporosis, Muscular Dystrophy, Multiple Sclerosis), 
  • Serious mental/developmental health conditions (such as clinical depression, Alzheimer’s, dementia, learning difficulties, Schizophrenia), 
  • Temporary situations (such as pregnancy, bereavement).  
  • Ensure that audio or body cameras are worn by the lead supplier representative present on all warrant installations or site welfare visits to check for vulnerabilities ahead of an involuntary installation or remote mode switch. All audio and footage will be available for audit  
  • Provide £30 credit per meter (or equivalent non-disconnection period) on all warrant installations and remote switches as a short-term credit/measure to remove the risk of customers going off supply at the point of PPM meter installation.  
  • Re-assess the case once a customer has repaid debts owed. Suppliers must contact the customer to offer assessment of whether a prepayment meter remains the most suitable and preferred payment method of choice for consumers; if any prepayment meter customer is clear of debt and wishes to move off their prepayment meter (understanding any changes in the tariff they will pay), the supplier must agree where the customer passes any required credit checks.   

In September 2023 Ofgem confirmed that the Code of Practice for the involuntary installation of prepayment meters (PPMs) would be incorporated into mandatory Supply Licence Conditions and it became part of those Supplier Licence Conditions on 8 November 2023.  

The voluntary PPM Code of Practice was developed by Ofgem in consultation with consumer groups and Energy UK, and sets out clear procedures that protect customers in vulnerable situations. It was put in place after evidence emerged of bad behaviour by suppliers severely affecting struggling customers. All energy companies signed up to this voluntarily in April, before it became mandatory at the start of November.  

Bad debt  

The regulator launched a consultation in December 2023 on proposals for a one-off price cap adjustment of £16 - equivalent to around £1.33 a month - to be paid between April 2024 and March 2025 to tackle this growing risk of ‘bad debt’.   

Bad debt refers to the amount of money owed by customers in the energy system, which is unlikely to be repaid. It is crucial that the regulator ensures that the burden of this increased debt falls as fairly as possible. 

PPM levelisation 

Ofgem is considering options to permanently end the prepayment meter premium, where prepayment customers are charged more than those who pay by direct debit to cover the additional costs and resources required by suppliers to provide energy via prepayment meter. A consultation is underway with an aim to ‘levelise’ these standing charges by April 2024 to coincide with the end of government support currently in place via the Energy Price Guarantee.    

The current legislative framework means that Ofgem cannot completely ban PPMs, or ban them indefinitely. However, Ofgem does not think a universal and absolute ban would be in customers' best interests, as many customers find PPMs a helpful and effective way of managing their spend on energy. 

Research  

Ofgem commissioned Savanta to undertake qualitative research with 50 consumers who pay for energy with a prepayment meter. The research was conducted between April-June 2023. While the qualitative sampling of this project aimed to reflect a spread of different types of PPM consumers, the sample size involved means that it is not statistically representative of all PPM consumers in Great Britain. As such, the findings should be interpreted as indicative rather than representative of PPM consumers nationally. 

Domestic customers and businesses can find advice and financial support schemes from Ofgem’s Energy Aware campaign.