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Determination of Committee priorities for Session 6: Submission from Ofgem

Submission from Ofgem for the evidence session on 5 October 2021

Dear Mr Lockhart,

Thank you for inviting Ofgem to give evidence at the Net Zero, Energy and Transport Committee on 5 October 2021.

During the session, we were asked about protections for pre-payment meter (PPM) customers, and I would like to set out, in more detail, some of the measures Ofgem takes to protect those on PPM tariffs.

PPM usage is often associated with consumer vulnerability. We have a range of rules in place with energy suppliers which, require them to provide specific support for their PPM customers. These include:

• emergency credit if a consumer’s PPM runs low on credit or runs out.
• ‘friendly-hours’ credit if top-up points are closed and a consumer’s meter is running low. This can be accessed overnight, at weekends and on public holidays.
• additional support credit if an individual is in a vulnerable situation (eg cannot leave their home) and has fewer options to pay.
• suppliers must work with a consumer to agree on an affordable debt repayment plan. This includes reviewing a plan if a customer’s situation changes to ensure that it is manageable for the customer.

The energy price cap includes a level on how much a supplier can charge PPM customers on default tariffs, including standard variable tariffs, per unit of energy. This ensures customers pay a fair and cost-reflective price for their energy.

Suppliers can only install PPMs for debt where it is safe and reasonably practicable to do so. If suppliers become aware that a PPM is no longer safe or practicable, they must offer the customer ways to remedy the issue. We continue to encourage all suppliers to consider the most appropriate payment method for the consumer, particularly where a PPM may not be the most suitable payment method.

Should a customer wish to change from a PPM to a credit meter, they should, in the first instance, contact their supplier to see if they are eligible. Most suppliers will change this for free. Consumers can also request to have a smart meter installed, suppliers cannot charge for installing a smart meter. When converting to a credit meter, or switching a smart meter to credit mode, a supplier is allowed to charge a security deposit. Where a security deposit is charged, it must not exceed a reasonable amount.

We introduced new protections on prepayment meter self-disconnection and ability to pay in December 2020. The new measures help consumers in crisis and with long term debt problems by making suppliers more accountable in offering support. The rules require:

• Suppliers to take all reasonable steps to identify all PPM customers who are self-disconnecting and offer appropriate support in line with existing and new obligations.
• Suppliers are required to offer emergency and friendly-hours credit to all PPM customers, and to offer additional support credit to customers in vulnerable circumstances.
• Suppliers are required to provide support to all customers in financial difficulties through the update and inclusion of Ability to Pay principles in the license.

Our analysis of domestic suppliers’ data during the pandemic shows that energy suppliers stepped up to the challenge and supported PPM customers to stay on supply. This included providing financial support, such as sending out additional support credit to be added to the account or pre-loaded keys.

We made £10m available in fuel vouchers for prepayment consumers who were at risk of self-disconnection due to Covid. This money has now been allocated through the Energy Redress Fund and supported close to 100,000 households. We recently confirmed a decision to ring fence further funds through the energy redress fund to continue to fund further PPM vouchers.

In 2020, we extended PPM warrant protections for consumers, which encourages suppliers to be proactive and support debt management rather than force fitting a prepayment meter when that may not be the best solution for the customer. We:

• Banned the installation of a PPM under warrant for the most vulnerable
• Prohibited suppliers from charging for warrant-related costs for vulnerable consumers
• Capped warrant-related charges in all other cases to £150

Ofgem has been clear that energy suppliers must make an extra effort to identify and respond to the needs of those in vulnerable situations. Under the Vulnerability Principle in Supply Licence Condition 0, domestic suppliers must identify and understand the characteristics, circumstances and needs of vulnerable customers and satisfy themselves that their actions are resulting in vulnerable consumers being treated fairly.

Consumer vulnerability has been, and continues to be, a key area of focus for Ofgem so we look forward to any future sessions you may wish to hold as the Committee continues throughout the course of the Parliamentary term.

Kind regards

Anna Rossington

Deputy Director, Retail Transition