Ofgem strengthens PPM protections for customers

Ofgem has confirmed it has strengthened protections for vulnerable energy customers around the installation of prepayment meters (PPM), mandating an industry code of practice.

It comes as Utility Week recently revealed the regulator was looking to expand the age range of vulnerable customers who should not have a PPM forcefully installed.

In an announcement on Wednesday (13 September) Ofgem confirmed that it was lowering the upper age limit from customers aged 85 with no other support in their home to 75. It has additionally banned the installation of PPMs in households with children aged under two years old.

The energy regulator has further confirmed its decision to make the voluntary code of practice, which was introduced in April 2023, mandatory. The new rules will come into effect on 8 November after a mandatory 56-day notice period.

Following the explosive allegations against British Gas concerning the way it forcefully installed PPMs, a moratorium on forced installations was announced, with suppliers no longer pursuing court warrants to install the meters in the homes of their customers.

A Market Compliance Review into PPM practices was first announced in January this year before officially commencing in February. As yet no date has been announced for when the results of this will be published.

Ofgem has additionally set out strict criteria which suppliers will have to meet before they are able to resume involuntary installations. Utility Week understands that no suppliers have yet met the full criteria.

The criteria includes:

• Suppliers must conduct an internal audit to identify wrongfully installed involuntary PPMs and offer compensation and a return to a non-prepayment payment method to any affected customers.
• The suppliers’ boards must attest that the retailer is ready to restart involuntary PPMs in compliance with the code, and that redress will be offered to wrongfully installed PPMs.
• If the PPM Market Compliance Review finds major concerns, the supplier in question will need to take corrective action before Ofgem would think it reasonable to restart.
• Suppliers must provide regular monitoring data to Ofgem, so that concerning trends on involuntary PPM practices can be identified early.

The energy regulator said it intends to periodically review the rules to check they are protecting the most vulnerable without unsustainably increasing bad debt.

Neil Kenward, director for strategy at Ofgem, said: “Protecting the most vulnerable consumers is at the heart of what we do, and this decision not only cements the protections Ofgem put in place for people deemed most at risk, it goes further to protect the most vulnerable households.

“Prepayment meters are an important payment method that help millions of households to manage their energy bills. But they are not suitable for everyone.

“Today’s enhanced rules are there to provide protection from bad practice while ensuring that when needed, and as a matter of last resort, suppliers are using involuntary installations in a fair and responsible way.

“Ofgem will be monitoring suppliers’ behaviour closely to ensure they are complying with the spirit and letter of these rules. If that is not the case we will not hesitate to take action.”

There have been concerns raised about the impact the moratorium will have on bad debt in the energy retail sector. In May, the ban was revealed to be adding around £30 million a month to the sector’s bad debt levels.

Responding to today’s announcement Energy UK’s deputy chief executive Dhara Vyas said: “The inclusion of the code of practice in suppliers’ licences confirms that involuntary PPM installations will be done as a last resort, with the proper consideration and support, and only in circumstances where it is safe to do so.

“Such installations will still play an important role in enabling suppliers to meet their responsibility to try and prevent customers falling further into arrears – as well as limiting the build-up of bad debt overall, which is ultimately recouped from all customer bills.

“Ofgem has previously acknowledged that the new process will result in fewer installations and an increase in consumer debt – in addition to that built up during the current pause. The extension of the exempt categories is likely to further increase the level of bad debt. It underlines the urgency of tackling the growing affordability crisis and the importance of stopping debts building up in the first instance.”