Ofgem moves to strengthen prepayment meter protections
UK energy regulator Ofgem has announced plans to impose more rigorous rules to protect customers using prepayment meters (PPMs) and to address the escalating issue of debt-related costs.
All energy suppliers signed up to a voluntary Code of Practice earlier this year after alarming evidence surrounding enforced PPM installations came to light.
In response to the revelations, Ofgem placed a temporary ban on all forcible installations, pending an investigation.
The regulator found that some energy suppliers were using aggressive tactics to force customers onto prepayment meters, which can be more expensive than other payment options.
Ofgem now intends to launch a Statutory Consultation to make these protections a mandatory part of the suppliers’ licence conditions.
Neil Kenward, Director for Strategy for Ofgem said: “We are committed to ensuring robust protections are in place for vulnerable customers.”
“The voluntary Code of Practice for prepayment meters enhanced protections, setting clear rules for when a prepayment meter is or isn’t acceptable, as well as new requirements around the installation of prepayment meters.”
“We are now seeking to make these voluntary arrangements binding, and we welcome all views on this Statutory Consultation.”
In parallel, Ofgem is proposing a small allowance in the PPM price cap to allow energy suppliers to recover bad debt associated with Additional Support Credit (ASC), which suppliers are obliged to offer to PPM customers in need, and is particularly important at times of high energy prices.
The regulator expects the level of ASC to increase further this winter, including as a result of the necessary action Ofgem is taking through its Statutory Consultation on involuntary PPM installations.
Ofgem proposes setting this allowance at around £13 per typical dual fuel PPM customer in total over 12 months.
However, in practice, Ofgem does not expect this ASC bad debt allowance to lead to PPM customers paying more on their bills than comparable Direct Debit customers in 2023/24, because of the government’s commitment to remove the PPM premium.
Neil Kenward added: “This type of credit helps some of the most vulnerable PPM customers, by providing them with additional respite, when they are struggling the most, and prevents them from going off supply.
“Many of these customers may have already exhausted alternative options, such as emergency or friendly hours credit, so ASC can be critical to avoiding self-disconnection.
“Some of this credit may not be repaid, but energy suppliers do not currently get compensated for this cost – the allowance aims to fix that, ensuring suppliers have no excuse not to offer ASC to customers in need this winter.
“We will be monitoring levels of ASC provided by suppliers.”
Spotted something? Got a story? Email [email protected]
