Installation scandal must not consign PPMs to history

The future of prepayment meters (PPMs) hangs in the balance following Ofgem’s call for evidence on their future use. Matthew Cole, head of the Fuel Bank Foundation, explains why recent scandals over forced installations must not spell the end of the prepayment tool.  

For many years prepaying for energy was something that very much operated under the radar.  Many years ago people used 50 pence pieces. In the early 2000s paper tokens were replaced by key and card meters, that in turn are being replaced with smart meters with ways to top up that don’t involve a walk to the corner shop.  With around 4 million households in Britain prepaying for their gas and electricity it was never really a priority focus area for growth, often being categorised as a simple debt repayment tool. And although in recent years some new suppliers started developing propositions targeted at prepaying customers, seeing the value within this segment, prepayment still wasn’t something that was really talked about at scale.

I ran an energy company service centre in Stoke when in 2003 the sector was turned on its head by the Bates Case. George and Gertrude Bates, both in their late 80s, were found dead in the living room of the house they had lived in for 63 years after a neighbour called the police.  Mr Bates had died of hypothermia in his armchair and Mrs Bates was lying on the floor having died of a heart attack following disconnection of their household energy supply. Notwithstanding Mr and Mrs Bates’s clear vulnerability they did indeed have funds, both at home and in a building society account, to repay what was due, but a disconnection had been arranged because they had not responded to letters sent by their supplier. And whatever the reasons for no response, there had not been an assessment of the impact of disconnection for a clearly vulnerable couple. This tragedy was a pivotal moment in the sector and drove real change, impactful change, with the sector strident that this must never happen again. From that day on the number of disconnections was reduced to a handful each year.

Fast forward two decades and another pivotal moment happened a couple of months back when The Times released the details of its undercover investigation at British Gas and the reality for some customers when a prepayment meter was to be installed.  Citizens Advice – amongst others – had been flagging that as a consequence of rising energy bills coupled with cost-of-living pressures over 600,000 people had been moved to prepayment metering due to debt. Within days all force-fitting of prepayment meters was suspended. And for the first time I started to sense that prepayments’ days may be numbered with many calling for it to be banned, and consigned to history.

At Fuel Bank we support families who are in what we describe as Fuel Crisis. This is at the sharp end of the Fuel Poverty spectrum and is simply the state when the household doesn’t have the money they need today to keep themselves warm today, and so face the reality of going cold. The detriment is particularly relevant for those who prepay who simply face the prospect of living without heat when the money runs out. Yes a direct debit may bounce, but it doesn’t cause the gas to shut off.  For prepaying customers it’s a binary thing: no money equals no heat or hot water, that many many families are well versed in dealing with, week in, week out. Over the last year we have supported around 300,000 people who are in this situation, with need verified by a trusted third party in the community, and then reverified by Fuel Bank.

There was a logical assumption that Fuel Bank would support the potential demise of prepayment, but we – and our clients – are clear that prepayment is not necessarily to blame with over 80% of Fuel Bank clients liking prepayment because it allows budgeting and mitigates the risk of falling into debt. The removal of prepayment would cause other issues: a budgeting tool would disappear, and the propensity for those who prepay to be on a low income risks an increase in bills being sent to ex-prepayers that simply couldn’t be paid. The thought and threat of a bill causes real anxiety for many Fuel Bank clients and needs to be considered carefully, alongside the situation flagged by Jonathan Brearley in his letter to the secretary of state, highlighting the highest level of debt seen in a decade, up to £2.5bn, which already impacts the price people pay for each unit of energy. From our perspective prepayment absolutely needs to change, but we shouldn’t be writing about it in the past tense just yet.

And so if the prepayment meter isn’t the villain in the piece, what needs to happen? Clear and exacting standards are needed across the sector that provide confidence to current or would-be pre-paying customers about the support they can receive and the standards they can expect, as well as when prepayment may not be suitable. Customers rightfully should see consistency between suppliers, and within each supplier too, also knowing that suppliers are being held to account.

Affordability is a second key issue to be addressed: I have heard more talk of a social tariff in the last six months than I did in the last six years and I have some hope that what NEA and other charities have been pushing for many years may become reality. If set at a meaningful level this will provide the surety that has been missing, and if targeted over winter to mitigate peak consumption it has the ability to be game changing for some.  But a social tariff is not the only solution: customers need to be continued to be protected from fluctuating prices, especially those customers where a social tariff may not be an option; those on low income need additional support to weather cost of living challenges in particular; and crisis support must be made available for those who, continue to fall through gaps, such as those who Fuel Bank support who can’t top up their meter, or fill their oil tank or buy bottled gas.

What is key, however is we use this period of reflection after The Times investigation to move quickly and to set new and exacting standards and provide meaningful support to those who prepay in particular. We are leaving winter behind us, but in six-or seven-months’ time we will need to be ready to support customers with targeted interventions as consumption starts to increase again. There is a real opportunity for collaboration and focus – yes let not forget what The Times identified, but use this to create new, something better, something that provides the right levels of support and protections when and where they are needed most. Saying goodnight to prepayment is not necessarily the answer and we have but a few months to work through the changes that are needed now. This needs to be our priority, our absolute focus, as we prepare for winter 2023.