Energy UK has today welcomed a new Code of Practice, agreed between Ofgem and all British energy suppliers, which sets out clear guidelines to further protect vulnerable customers when making involuntary installations of prepayment meters.
Earlier this year, all suppliers voluntarily paused prepayment meter installations carried out under warrant in order to review their own practices. Since then, the energy industry has been working closely with Ofgem to develop this Code of Practice as well as on the regulator’s own review.
Bad debt (ie arrears which are not paid back) is ultimately recouped from all customer bills, disproportionately impacting low-income households. Data from Ofgem shows a steep increase in debt over the past year, which in January 2023 was standing at £2.5 billion.
While prepayment meters are valued by many customers as a useful tool for managing their own energy use and costs, suppliers also have a responsibility to try and prevent customers falling further into arrears – to minimise the build-up of the individual debt and to limit additional costs for others.
Switching some customers to prepayment meters on an involuntary basis is a critical way of doing this – however it must only be used where it is safe and practical for households and when all other options, such as repeated attempts to offer support and discuss repayment options with the customer, have been unsuccessful.
The new Code brings clarity and consistency to the process and assessments that should be carried out by all suppliers – before, during and after any involuntary switch to prepayment meter – especially in relation to identifying when any installation may not be safe for vulnerable customers.
Before resuming any involuntary installations, suppliers will now need to be able to demonstrate they have processes in place to ensure adherence to the Code, as well as presenting a plan to Ofgem on redress for customers that may have wrongfully had prepayment meters installed.
Dhara Vyas, Energy UK’s Deputy Chief Executive, said:
“While involuntary PPM installations are necessary to prevent debt building up further and to minimise additional costs for all customers, the new Code of Practice should give reassurance that it will be done only as a last resort, with the proper consideration and support, and only in circumstances where it is safe to do so.
“Bad debt within the energy industry is increasing to unsustainable levels. As Ofgem acknowledges, the new process will lead to fewer installations by warrant and so it’s likely customer debt will increase even further as a result – as well as from the current pause – which will need to be addressed.
“While it’s very welcome that those on prepayment meters will now pay the same rates as others, this issue also underlines how important it is to make bills affordable for all customers in future. As well as protecting customers from high prices through a combination of targeted financial support – such as a social tariff – access to energy efficiency measures and overdue retail market reform, building more cheap, domestic, renewable energy will help to bring down prices in the long term.”