‘Real opportunity’ for competitive PPM tariffs

There is a “real opportunity” for prepayment meter (PPM) tariffs to be priced competitively, an Ofgem executive has insisted.

Jonathan Windeatt was speaking on day two of Utility Week’s Customer Summit in Birmingham last week, where he shared his view that despite controversy over forced installations, PPMs can be beneficial for some types of customers.

“I’m very much of the view that for the right customer, with the right technology, the right products, prepayment can also be a fantastic way for people to manage their energy. Consistently across the years, for people who choose prepayment, you’re getting 80-90% satisfaction rates,” he pointed out.

The senior manager for retail further explained how he believed PPM customers, who have historically faced higher costs to serve, could soon start to see cheaper tariffs.

He said customers “should start to see a real opportunity to price prepayment competitively, if not lower” than other forms of payment “because the credit risks to the supplier should be negligible”.

He pointed to other ways of reducing the cost for PPM customers, citing modifications to the Uniform Network Code, concerning the allocation of unidentified gas that cannot be directly attributed to customers, for example, due to leakage or theft from the gas network. This gas is allocated to all customers but in different proportions depending on their End User Category (EUC) band and metering class. For EUCs 1 and 2, there are separate bands for PPM and non-PPM customers for both domestic and non-domestic customers. The modification proposed by Centrica (UNC0838) would merge the weighting factors for PPM and non-PPM customers in the same EUC, metering class and sector.

Windeatt also said smart prepayment pay as you go could potentially become “a real tariff of choice”.

He added: “But if you do that we’ve got to make sure that the fundamentals of consumer protection are right, not just at the point of sale, but through the lifetime of the meter operating in that way.”

Load limiting

Speaking earlier that day EDF’s managing director of customers Philippe Commaret said he believed PPMs had been “demonised” and that he thought “it’s a shame”.

He added that EDF was looking at “load limiting” the amount of energy a PPM customer is supplied with as a way of stopping them from self-disconnecting in a bid to make the payment method more attractive.

Commaret said: “We are investigating, for example, if we could leverage the smart meters that we use in order to test the same kind of solutions that we have implemented in France, which is to add a load limiting type of approach for the electric meters so that the customers have access to a very tiny amount of energy, even if they haven’t topped up their meter.

“It’s something which is pretty difficult to implement and which required us to change the mode of the meter. Unfortunately, I think the design of smart meters in the UK is not exactly fit for this type of solution, but we are still working on that.”

Windeatt however said there are concerns around load limiting.

He explained there is a standard licence condition which states “where a meter has been configured in such a way as to use a seriously limited flow of energy, that should be treated as a disconnection, not a self-disconnection”.

On Monday morning, the government released figures showing the extent of forced installations of PPMs over 2022. It said 94,000 PPMs were installed under warrant across the year, with Scottish Power, British Gas and Ovo responsible for 70% of these.