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Energy debt soars to £2.5bn as suppliers’ prepay meter practices under review

Paloma Kubiak
Written By:
Paloma Kubiak

Millions of billpayers are struggling to afford the cost of gas and electricity, with energy debt reaching £2.5bn. As more people are switched to prepayment meters, Ofgem said it will carry out a review of suppliers’ practices which have recently been under fire.

This is the highest increase in energy debt the industry watchdog Ofgem has seen in over a decade, according to its CEO, Jonathan Brearley.

The figure was revealed in a letter to energy and business secretary Grant Shapps where the Ofgem boss outlined steps it is taking to ensure suppliers treat customers fairly as they seek to recoup debt.

Earlier this week, energy firms were threatened with legal action over forced prepayment meter switches following concerns that suppliers were remotely switching smart meter customers over to pay-as-you-go without their knowledge.

Meanwhile, reports surfaced that batch warrants were granted by court magistrates in a matter of minutes, giving suppliers power to force installation at homes where billpayers have fallen into debt.

Brearley said PPM installations should be a last resort as Ofgem said it expects a “minimum standard” as it looks at the rules around mandatory moves to PPMs.

‘Tackling inappropriate energy supplier prepayment meter practices’

In the letter to Shapps which included the heading ‘tackling inappropriate energy supplier prepayment meter practices’, Brearley noted three areas where it will take further action.

This includes a market compliance review on suppliers’ practices on PPMs. “It will ensure suppliers have robust procedures, governance and oversight in place. It will include assessing how suppliers assess whether a PPM is suitable, before any action is taken such as remotely switching to PPM or installing a PPM under warrant. We will be sampling individual consumer cases to check if suppliers adhere to their own practices,” he wrote.

Ofgem will also require enhanced reporting of data from firms “until we are satisfied that appropriate consumer outcomes are being delivered”.

And it will launch a review of existing licence conditions, “with a focus on the highest priority issues” including identification of vulnerabilities, PPM safe and reasonably practicable guidance, and processes in place for installing or switching customers to PPM.

Brearley wrote: “The rules are, and will always be, a minimum standard for suppliers to follow. We recognise and welcome the fact that many suppliers have already taken voluntary action that goes beyond their licence obligations, and support your [Shapps] call for more suppliers to go further in protecting their vulnerable customers this winter.

“We look forward to discussing what more can be done with you and the Government over the coming week, alongside potential longer-term interventions to tackle the affordability challenge such as the social tariff, targeted at those most in need.

“Working together, we believe it is possible to deliver a sustainable solution to ensure the affordability of energy, fair treatment of consumers, and the long-term financial stability of suppliers.”