Ofgem’s actions welcome, but consumers currently on prepayment meters need support

A blog post by Consumer Scotland's Energy Policy Manager Grace Remmington

Our recent Energy Affordability Tracker and data from advice bodies have highlighted the problems faced by energy consumers on prepayment meters, either due to a pre-existing prepayment meter or because of forced installation. This issue is of particular concern because Scotland has a disproportionate number of households on prepayment meters and many of these are likely to be living in fuel poverty.

There are ongoing and immediate challenges for consumers. This includes the deeply concerning reports in The Times this week on the issue of forced installation of prepayment meters for debt collection. The newspaper’s investigation led to industry regulator Ofgem warning all suppliers that it is unacceptable to impose forced installations on customers struggling to pay their bills before all other options have been exhausted and without carrying out thorough checks to ensure it is safe and practicable to do so. Ofgem has also announced an industry-wide investigation into the rapid growth in prepayment meter installations.

The issues faced by prepayment meter customers identified in our recent tracker survey include affordability challenges with a range of impacts including struggling financially, finding it difficult to keep up with their energy bills and cutting back on food.

Given these issues, we welcome Ofgem’s plans - announced before the Times investigation - to undertake a detailed assessment of the installation of prepayment meters with a focus on self-disconnections, remote switching and forced installations.

Consumer Scotland previously highlighted the data gap that exists on prepayment meter switching and called for enhanced monitoring of remote and legacy prepayment switches. Therefore, we are pleased with Ofgem’s commitment to increasing the frequency of these metrics as important in understanding how many consumers are being affected.

We also fully support Ofgem’s plans for a prepayment market compliance review that will help to ensure suppliers are following the rules for prepayment consumers. As well as putting the focus on suppliers not following these rules, it will also recognise any suppliers who have adopted good practice around their prepayment meter consumers.

These measures are particularly effective when coupled with a review of the existing rules and guidance. The unprecedented circumstances of the energy crisis have exposed existing market failings around prepayment meter consumers – as well as bringing long-standing poor practice to the forefront of industry and public awareness.

The findings from our next Energy Affordability Tracker will be released soon, showing the impact of the winter period on consumers’ ability to manage financially, afford their energy bills and on their wider health and wellbeing. Our initial analysis suggests the data is likely to show the continuing disproportionate impact on those with prepayment meters.

In this context the precautionary principle approach should be applied to switching consumers to prepayment meters. The primary consideration for suppliers should be fulfilling the duty of care they have to their customers, even while the ongoing reviews are being undertaken.

The suspension of forced prepayment meter installation is very welcome and gives government, the regulator, and industry breathing space whilst they work to put in place more effective protections for consumers who prepay for energy. However, there are 421,000 households already using prepayment meters in Scotland, many of whom are in vulnerable circumstances and facing acute affordability challenges. They need existing protections to be proactively enforced, and sufficient financial support to remain connected to heat and power supplies.