Ofgem, the energy regulator, is proposing a cap to charges on prepayment meters (PPM) installed through a warrant. They are now consulting on their plan to limit these charges to £100 or £150 and to outright ban charges for the most vulnerable customers, including those in financial hardship.
Installing a prepayment meter by warrant is an energy supplier’s last resort in the debt recovery process, when customers can’t or won’t engage with suppliers to agree a solution. Once the meter is installed, suppliers can pass on these costs to the customer, increasing the amount of debt they owe. These charges can range from £200-£900, with the average being £400.
Consultation between Ofgem, consumer groups found that PPMs are often pushed onto consumers too quickly, rather than being used as a last resort. Ofgem’s report notes that in 2015, “warrant applications were made for almost 250,000 accounts and 86,000 PPMs were installed under warrant”.
Ofgem have been particularly concerned over the harm caused by these charges, as those subjected to PPM installation by warrant are more likely to be consumers in vulnerable circumstances. The nature and amount of these charges means that it can take several years for these customers to pay off their debts. On top of this, PPM customers experience weaker market forces to ensure PPM tariffs are competitive – meaning that they pay more and have fewer choices than other energy customers. These issues combined mean that these consumers face severe financial difficulty and detriment.
Prepayment meters have become an increasing focus for regulators. In its investigation of the domestic energy market, the Competition and Markets Authority found that competition is weakest in the PPM sector, with PPM customers overpaying the most, having the least amount of choice, and experiencing more problems switching. To remedy this, the CMA recommended a price cap on prepayment meter tariffs. You can read more about the CMA’s investigation here.
Ofgem want to ensure that PPMs are only installed under warrant as an absolute last resort, and believe the proposed cap will increase incentives on suppliers to engage with customers in debt to support them, such as putting them on debt repayment plans. These proposals will also make the process more transparent and consistent across the sector.
A number of rules already exist which prevent many consumers from going through the warrant process if having a PPM would not be safe and practical. You can find out more information about customers’ rights under installation by warrant here.
Ofgem’s final proposals and consultation document can be found here.