Ofgem is exploring options to reduce the need for prepayment meters (PPMs) to be installed in consumers’ homes, following the recent outcry over alleged supplier malpractice.
The energy regulator has published a call for evidence on the relevant licence conditions and guidance covering PPM installations, while chief executive Jonathan Brearley has called for installations to be reversed and compensation offered where rules have been broken.
It comes following the explosive allegations made against British Gas which was accused of flouting industry rules and forcefully installing PPMs in the homes of vulnerable customers.
While Ofgem is primarily considering changes that could be made to existing rules, it said it is open to the consideration of introducing new obligations that may help support PPM customers.
In its call for evidence the regulator asks retailers for their views on “load limiting”, a process where a customer’s smart meter is set to limit the amount of energy that can be drawn and so therefore the amount of debt they can build up if they are struggling to pay.
The benefit of this is that instead of a consumer completely self-disconnecting if they run out of credit, a basic level of supply remains such as for keeping the lights on and the fridge running. Once a customer has exceeded the maximum amount of energy that can be drawn, the meter would disable.
Ofgem admitted that it previously decided not to trial or introduce load limiting into the domestic sector due to concerns over consumers facing “disconnection by the back door” and lack of supplier development of plans or intent to utilise the functionality.
It added: “Our latest (initial) assessment suggests that load limiting is only practical for electricity, and only SMETS 2 smart meters have the full capability for load limiting, SMETS 1 meters have limited capability.
“Even if feasible in GB, it would not be suitable in all cases. For example, it is not clear whether load limiting would leave sufficient electricity to ensure continuous supply for medical equipment.”
Additionally, Ofgem is seeking views on how to improve the PPM experience for customers such as by encouraging the take up of smart PPMs over traditional PPM meters.
Smart meters allow consumers to remotely top up and suppliers to remotely provide emergency credit, thereby simplifying the process.
Smart meters can also be remotely switched to PPM mode, reducing supplier costs and disturbance to the consumer of having someone physically access their home under warrant. They can also be easily switched back if circumstances allow.
Although suppliers are obligated to install a smart PPM over a traditional PPM where possible, figures show that 56,600 traditional gas and 39,600 traditional electricity PPM meters were installed in 2022 by large suppliers alone.
Ofgem is therefore considering whether more could be done to ensure smart meters are the default for PPM installations.
Other solutions being explored include reducing or eliminating the gap between PPM and direct debit tariffs, as well as mandating suppliers to provide Prepayment Metering Interface Devices (PPMid) to consumers.
These act as a two-way version of an in-home display which as well as displaying key information, allow customers to use the device to activate emergency credit and manually enter top up codes if there is an error with the smart meter.
Ofgem is also considering whether suppliers must consider financial vulnerability when assessing whether a PPM is safe and reasonably practicable, something they are not required to do at present as the guidance generally covers mental or physical disability. Yet the cost of living crisis has seen millions more households struggling to pay their bills.
However, Ofgem warned: “We recognise that record energy prices have changed the context, but broadening PPM protections to financially vulnerable customers would have other impacts, for example increasing the level of unpaid energy bills to be recovered from other billpayers.
“And it is not clear that suppliers have the information available to assess financial vulnerability effectively. We welcome views on the merits of including financial vulnerability when assessing ‘safe and reasonably practicable’.”
Ofgem’s latest Market Compliance Review will focus on the issues surrounding PPM installations and their impact on consumers. It is also conducting a separate investigation into British Gas over the allegations made against the supplier.
Commenting of Ofgem’s announcements, Brearley said: “The rules and regulations are clear that installing forced PPMs should only be done as a last resort and only where it is safe and practicable to do so.
“We expect suppliers to treat customers with compassion and professionalism and those executing a warrant should take into account what they find when they visit a home and pause the installation if they see a safety risk. Where this hasn’t happened, we will hold suppliers to account.
“However, I’m telling suppliers not to wait for the outcome of our reviews and to act now to check that PPMs have been installed appropriately, and if rules have been broken, offer customers a reversal of installations and compensation payments where appropriate. There will also be fines issued from Ofgem if the issue is found to be systemic.”