Citizens Advice says it wants more clarity over precisely what legal barriers are preventing Ofgem from banning suppliers forcibly installing prepayment meters (PPMs).
In recent weeks there have been growing calls for a moratorium on the forced installation of PPMs, with research from the charity showing millions of consumers have been self-disconnecting after running out of credit.
The concerns have prompted energy secretary Grant Shapps to write to energy suppliers calling on them to stop what the government calls “the harmful and anxiety inducing practice” of forcibly moving consumers over to PPMs “without taking every step to support consumers in difficulty”.
As such, the government is asking suppliers to voluntarily commit to stopping the practice – a move backed by Ofgem.
Ofgem’s chief executive said earlier this week that the regulator is launching a review into self-disconnections, remote switching and forced installations as well as the “checks and balances companies have around any decision to put a customer on a prepayment meter”.
Jonathan Brearley said that while his organisation supports the call for suppliers to stop the forced installations of PPMs unless “all options have been exhausted”, he said that Ofgem does not have the legal power to do this.
His comments have prompted questions from Citizens Advice.
Gillian Cooper, head of energy policy for the charity, told Utility Week: “Ofgem has said it cannot ban energy suppliers from forcing people onto prepayment meters due to legal barriers.
“It needs to provide more clarity on what these barriers are, given there are clear rules that mean energy suppliers have to treat all customers fairly.”
Writing on Twitter Richard Hall, the charity’s chief energy economist, also questioned Brearley’s comments.
A new blog from Ofgem’s CEO says it “does not have the legal power to completely ban the forced installations of pre-payment meters via the courts.” @ofgem: can you be more specific on what the legal block to a ban is? If it’s a law, which one?https://t.co/iHJvAN93RT
— Richard Hall (@RichHallCA) January 23, 2023
When it was suggested the legal barrier could lie within the Rights of Entry (Gas and Electricity Boards) Act, Hall replied: “I can’t see anything in that Act that would prevent a ban. It’s silent on prepayment metering; it doesn’t appear to confer a legal right for it to be used.”
Yet Tim Speed, energy partner at law firm Shakespeare Martineau, explained that while Ofgem has the power to ban some suppliers from forcibly installing PPMs, this does not mean it can ban the practice outright.
He told Utility Week: “If a supplier is treating customers fairly then he’s probably right. If a supplier has not breached the standard licence conditions, or if there’s no other breach, then it’s difficult to see where Ofgem’s powers can come from in terms of going to court to seek an order to completely ban the forced installation of prepayment meters.
“It’d be different if there was a continued breach by a supplier. If a supplier was consistently adopting processes that Ofgem considered were not treating its customers fairly, for example if they were not having regard to vulnerable customers or were not following the correct process when changing to prepayment meters… in those circumstances, there may well be a power to make a provisional or final order under the Electricity Act.”
In response, Ofgem pointed to several pieces of legislation which give suppliers the right to install PPMs where customers are in debt including the Electricity Act 1989, Gas Act 1986 and Prepayment Meter Regulations 2006.
The regulator also confirmed that it does have the ability to ban an individual supplier from forcibly installing PPMs in customers’ homes where the supplier does not comply with its licence conditions. Ofgem cannot however impose a blanket ban on all suppliers installing PPMs.
An Ofgem spokesperson said: “Under current legislation, energy suppliers have a right to install a prepayment meter where a customer is in debt. Therefore Ofgem cannot enforce a complete ban on these installations unless there is a legislative change from parliament.
“However Ofgem does have statutory powers to protect consumers, and so we have imposed various requirements to control how suppliers can exercise this right, particularly around the checks and processes they must follow before installing a prepayment meter. We also carry out regular compliance work to ensure suppliers are following these rules.”
Ofgem responds to BEIS concerns over PPMs
Brearley wrote to Shapps this week to outline what actions Ofgem is taking to address the concerns surrounding forced PPM installations.
The regulator will conduct a further Market Compliance Review (MCR) focused on suppliers’ practices on PPMs to ensure they have robust procedures, governance and oversight in place.
It will increase the frequency of its monitoring of key metrics, expanding data collection as needed to monitor issues raised by the MCR.
Finally, it will launch a review of existing licence conditions which will focus on the “highest priority issues”. These include the identification of vulnerabilities, PPM ‘safe and reasonably practicable’ guidance, and processes in place for installing or switching customers to PPM.