Pre-payment meters: why there should be more protections for energy customers in debt

Being in debt to your energy provider can be a stressful and scary time. It can make it even worse if debt collectors turn up at your door to install a prepayment meter (PPM). Recent stories from the media, like this shocking account in the Times, highlighted how widespread this issue was. 

While there are rules in place from Ofgem, the energy regulator, these news stories suggested that the rules were not being followed. In response to public pressure, Ofgem announced a temporary ban on the forced-fitting of PPMs, a market compliance review of current practice and a call for evidence on whether the rules needed to change. We welcomed the first two and in our response to the call for evidence we made some key recommendations. 

Most people pay for their energy through direct debits, but you can also pay as you go through PPMs. There are two types of PPMs: traditional – which you physically top up; and smart – where you can top-up through an online account.

Energy firms can install a traditional PPM for customers who are in debt and, except in certain circumstances, can legally enter someone’s home through a warrant to force fit a PPM. Companies are also allowed to remotely switch smart meters to pre-payment mode without having to enter the home. Both of these can be extremely traumatic and can lead to people self-disconnecting – when they don’t have energy because they can’t afford it or can’t physically top-up the meter.  

Firms are not allowed to do this if someone is unable to top-up because of an existing vulnerability or because they would find it traumatic because of their mental health problem. However, the stories from the media and from our Research Community suggested that some firms weren’t following these rules. The review from Ofgem will hopefully draw light on the extent to which the rules were broken and by which firms.

Thankfully, energy firms agreed to temporarily stop fitting PPMs in these ways but this ban will only last until Ofgem is confident that firms are following the rules. Ofgem have said they can’t implement a full ban so we want the government to give them the powers to do so. 

Ofgem’s current rules say PPMs shouldn’t be installed where it wouldn’t be ‘safe and reasonably practicable,’ this could include if someone was in a vulnerable circumstance which meant they couldn’t top-up the meter. The problem with this is it relies, firstly, on staff at firms asking the right questions about someone’s circumstances. Secondly, it puts an onus on individuals to know their rights and to advocate for themselves that they shouldn’t be moved onto a PPM. But we know from our research that very few people with mental health problems disclose to their energy firm and many people in debt will struggle to respond to communications from their energy company.

We therefore believe that Ofgem should require firms to assume that someone in debt is in a vulnerable circumstance – meaning they are at risk of harm if they are put onto a PPM. This is really important because half of people in problem debt will have a mental health problem. Energy firms should have to check and confirm someone isn’t in a vulnerable situation and if they can’t be sure, then they shouldn’t install a PPM.

While it’s great to see Ofgem looking at the specific issue of installing PPMs, there are still lots of concerns about how the market currently works for customers. Some people can prefer to use a PPM because it gives them a bit more control and oversight over the energy they are using – they only use what they can pay for. However, the rate PPM customers pay for their energy is higher than those who pay by direct debit, which essentially means you pay more for the same amount of energy. 

Another key issue is standing charges, which is where you pay for the cost of being connected to the energy supply, regardless of if you use energy or not. So people with PPMs can end up paying for standing charges first rather than the energy they want. Before the current energy crisis, a further problem for people with PPMs was not being able to access as cheap deals as people paying by direct debit. 

In the recent Spring Budget, the government announced the difference in the price people with PPMs pay compared to direct debits will be covered by the existing Energy Price Guarantee scheme. But this only lasts until April next year. So we want Ofgem to conduct a wider review of PPMs. The review should consider a long-term solution and make sure people with PPMs are able to get good deals and use them for the benefits – without being unfairly penalised.