Energy suppliers should absorb bad debt, consumers say

Britons “instinctively oppose” the force-fitting of prepayment meters (PPMs) as a debt recovery measure, Ofgem’s review into the practice concludes.

The public also rejects the trade-off of protecting vulnerable customers with rising energy bills for those who can pay.

Instead, British energy consumers believe that suppliers should absorb debt within their perceived profits.

Ofgem’s consumer research has been published alongside a new code of practice for energy suppliers around force-fitting of PPMs.

All suppliers have signed up to the voluntary code of practice, which outlines more stringent processes before a forced PPM install can be carried out. It also means that certain groups are exempt from forced installs, including those aged over 85 and people with severe health issues.

Ofgem’s Consumer attitudes document concludes: “It is clear from the research that British energy consumers instinctively oppose the practice of energy suppliers force-fitting PPMs as a debt recovery measure. 61% opposed this practice in our online survey and just one in five support it.”

The report adds that “there is a great deal of sympathy for those that may be getting into debt as a result” of the cost of living crisis, however “there was much less sympathy for energy suppliers seeking to recover debt from unpaid bills, as consumers tended to think they should just absorb this debt within profits that consumers perceive to be increasing and excessive”.

“This sentiment remained even when the difference between wholesale and retail energy suppliers was explained,” the report adds.

Meanwhile, PPMs themselves were seen as “expensive, inconvenient, and punitive by many non-users, which only made them more resistant to the practice of force-fitting by suppliers”.

Ofgem concedes that making it harder to recover debt using PPMs will increase the level of unpaid debt. The regulator warns that if companies are unable to absorb this debt then “they are likely to pass that cost on to all households”.

Energy UK has also warned that the new code of practice will exacerbate already “unsustainable” levels of bad debt.

Energy UK chief executive Dhara Vyas said: “Bad debt within the energy industry is increasing to unsustainable levels. As Ofgem acknowledges, the new process will lead to fewer installations by warrant and so it’s likely customer debt will increase even further as a result – as well as from the current pause – which will need to be addressed.”

Despite the warnings, Ofgem’s consumer research concludes that the public “rejects” the premise of higher bills to cover the effects of tightening the rules on forced PPMs installs.

“In conclusion, when presented with the trade-off between protecting vulnerable customers and rising energy bills, British energy consumers reject the premise,” it states. “They show only limited willingness to pay extra on their bill to protect vulnerable groups from the practice.

“In an environment where consumers think the cost of living is rising, energy bills are a key driver of the rise and suppliers are perceived to be making excessive profits, this limited willingness is unlikely to change.

“It is therefore reasonable to conclude that public opinion is likely to be resistant to any policy change that involves their bills going up further, even though they do want vulnerable consumers protected from being put on a PPM without their consent somehow.”

The review of force-fitting PPMs was carried out after explosive allegations made against British Gas as a result of an undercover investigation by The Times. All suppliers subsequently agreed to halt their PPM warrant activity while the regulator’s review was carried out.

Despite public resistance to PPMs, Matthew Cole, head of the Fuel Bank Foundation, recently wrote for Utility Week on why recent scandals over forced installations must not spell the end of the prepayment tool.

He argues that PPMs remove bill anxiety for vulnerable customers and is an important budgeting tool for many, with 80% of Fuel Bank clients liking prepayment.

However, some have called for the PPM exemptions announced as part of the Code of Practice to be extended further.

A spokesperson for the End Fuel Poverty Coalition said: “This code of practice simply does not go far enough and the fact it is voluntary undermines its objective.

“There are really vulnerable groups which have been omitted from its full protection and we have serious concerns about how it will be implemented, such as how people will prove their medical conditions without being humiliated by an energy firm health inspection.”

The spokesperson added: “The plans also fail to deal with the elephant in the room – the growing household energy debt mountain. According to figures from the Warm This Winter campaign 29% of the population is in debt to their energy firm.

“This was the government’s opportunity to take meaningful action and introduce targeted debt relief for those most in need. It has failed to do so and seems to have given in to energy industry demands to let them go back to the bad old days of forcing prepayment meters onto customers in distress.”