Tackling inappropriate energy supplier prepayment meter practices
This is the hardest winter for decades, not just because of the cost-of-living but also from pressures on the NHS, public services and transport. That’s why, alongside government support schemes such as the Energy Price Guarantee, we are acting to protect consumers across the board.
But as a regulator we cannot be complacent. We need to understand all aspects of the lives of the people we serve. That is why I am concerned about the sharp growth in households struggling to pay their bills being switched over to pre-payment meters, sometimes without their even knowing about it, leaving them without heating.
I have spoken to many customers including those who use pre-payment meters. Many families choose this as an option principally to have more control over their budgets. And used responsibly, they strike the right balance between protecting customers from being cut off and enabling suppliers to recoup debt.
However, I have heard directly from people who have faced poor practice from suppliers. For example, one customer I spoke to in Glasgow left to go on holiday and returned to find he’d been switched to pre-pay without his knowledge and had no way to top up.
Ofgem has already taken action - last year we ran comprehensive reviews assessing suppliers’ systems and processes for dealing with its most vulnerable customers and assessing the way they treat customers who are struggling to pay their bills.
Although there is good practice in many places, no company came through without needing to improve and all have been required to submit plans to meet the standards we set. We sent out legal orders to improve and one company agreed to pay into Ofgem’s compensation fund.
However, the Secretary of State and Citizens Advice are right to remain concerned. The numbers of forced installation of pre-payment meters is extremely high. It is simply not acceptable that vulnerable customers are left in the dark and cold in Winter.
Therefore today, we will take forward a further a more detailed assessment to check whether plans have led to improvements. This review will focus specifically on self-disconnections, remote switching and forced installations and, the checks and balances companies have around any decision to put a customer on a pre-payment meter. If we find that they have not taken due care in this process, we will take further legal action against them.
Second, what we expect of suppliers is a minimum standard, so we support the call from government for suppliers to voluntarily do more and to stop the forced installations of pre-payment meters unless all options have been exhausted. Ofgem does not have the legal power to completely ban the forced installations of pre-payment meters via the courts.
Finally - we will continue to look at the rules around mandatory move to pre-payment meters, when a court warrant can be applied for and the steps that need to be taken first. We encourage suppliers to heed the call of the secretary of state to be fully transparent with their data around pre-payment meter warrants.
Together these steps will help us to put a more balanced pre-payment meter regime in place - which on the one hand, underlines people’s responsibility to pay for the energy they use as far as they can and on the other, makes clear suppliers’ responsibilities to the most vulnerable households.
However, this issue is complex and at the heart of it is the fact that many customers cannot pay their bills given the dramatic rise in the cost of energy. Whilst there is some hope on the horizon with wholesale prices falling and eventually feeding through to bills, the market remains volatile, and prices are still much higher than before the crisis.
That is why today, as part of the further work on price regulation announced by government in autumn last year, we are calling for a serious assessment of a social tariff. This is a tariff that is set at a different rate for vulnerable customers and protects against the impact of extremely high prices. If it can be made to work, this could tackle the root cause of this issue and the distress that many customers are in this Winter.
Ofgem will continue to work with others to manage the impact of the gas crisis - government, energy sector, industry, business, civil society - above all with the public.
We do not have time to waste.