Ofgem chief executive Jonathan Brearley has admitted unrecoverable debts arising as a result of the ban on forced prepayment meter (PPM) installations could increase bills for paying customers.
In a letter to energy retailers on Wednesday (15 February) Brearley confirmed the ban on PPM installs by warrant extends to the remote switching of smart meters to prepay mode and that it would last until 31 March.
All suppliers recently agreed to halt their PPM warrant activity following the explosive allegations made against British Gas as a result of an undercover investigation by The Times.
However Brearley said that following internal reviews into their PPM processes, some retailers have expressed concerns about the levels of customer debt caused by the ban.
He added: “If this debt cannot be recovered from some customers, then this increases costs for suppliers.
“We are aware of the difficult balance here as unrecoverable debts from some customers may then be recovered from the bills of paying customers, many of whom are themselves struggling with paying their bills given the wider affordability issue.
“We have an ongoing programme of work to assess costs to suppliers from customer debt. Once we have analysed your responses to our Request for Information on debt, we will be able to determine what action we need to take and, if an adjustment is required, we will act quickly.”
Brearley further confirmed that the regulator will complete “an intensive consultation process” over the next six weeks which will consider how the rules and guidance on the use of PPMs apply in the current “exceptional circumstances”, as well as whether these should be amended going forward.
Speaking to Utility Week this week Good Energy chief executive Nigel Pocklington warned debt issues could “spiral out of control” if the use of PPMs is discouraged.
“We are going to need to return to a world where this is a product that is appropriate for some people when properly policed because otherwise debt and payment issues will spiral out of control. It is not an ethical position to allow households to get into unpayable debt,” he said.
Similarly Utilita boss Bill Bullen also expressed his concerns on the matter.
He told Utility Week: “It’s easy to make bold statements but unless you’re prepared to have a grown up conversation about money then the debate goes nowhere. If these customers aren’t going to pay, who will? Because energy suppliers are already losing money and are people actually going to vote for an increase in their own tariffs to cover the cost of non installation of prepay or an increase in taxes? Or are we just going to let this spiral until it gets to debt collection?
“My point is, this issue is much wider than nasty, old energy companies. There needs to be a solution. But at the moment all we get is name-calling.”