Moratorium is finished - but it should have been made permanent
This week, Ofgem announced that energy companies can resume forced installation of prepayment meters (PPMs).
For some people, PPMs work because it helps them manage their budgets. The disadvantage of PPMs is that consumers must find the money to cover periods of high usage, particularly in the winter. By contrast, direct debit customers can spread their energy costs across the year.
Why did involuntary PPM installations proliferate? Increased energy prices made bills unaffordable for many people. Last year, demand for advice on energy from the Scottish CAB network issues rose by 34% over the year before. Soaring prices forced people into energy debt. The average energy debt Scottish CAB network clients presents is £2,307. The energy companies argue that they have supplied a service and need to re-coup the arrears.
PPMs have become a way for suppliers to manage consumers’ debts, moving them away from their previous role as a potentially useful budgeting tool. More fundamentally, forced PPM installation removes a person’s semblance of choice and disempowers them from making appropriate choices about their financial obligations.
Forced PPM installations were routine until last February, when some newspapers reported a couple of very emotive cases. The resulting outrage led Ofgem to announce a moratorium while it consulted on a code of conduct. That pause is over and suppliers can return to involuntary installations of PPMs. Our position is that this moratorium should have been permanent.
Ofgem has produced a new code of practice for forced installations, but it does not go far enough. For example, the code prevents suppliers undertaking forced PPM installations in households where there is a child under two years old but allows installations in homes where three-year-olds live. Similarly, a household where all the occupants are over 75 is exempt but a household with one 75-year-old and one 74-year-old is not. These age-related cliff edges mean families in difficult financial circumstances may end up with PPMs against their wishes.
Having to pay for energy up front through a PPM can have serious implications for people’s finances. One of our CABs saw a person who lost his job during the Covid pandemic and was struggling financially. He had £97 gas debt and £32 electricity debt. 25% of his PPM top-up went towards repaying his debts. When he approached the CAB, he had 66 pence left on his meters and had applied for a Crisis Grant. With the resumption of involuntary PPM installations, this kind of scenario is likely to re-emerge in the coming months. This example underscores why Ofgem must make its code more robust and why suppliers must work harder to help people arrange a realistic repayment plan.
As this story shows, energy is a luxury that too many people can only afford in the first weeks of the month, after which they go without until the next payday. Going to bed early and staying there all night with the lights off; rationing their food to pay for their heating; spending hours in the library or sitting on buses going round in circles, just to stay warm. These are stories we hear often now. This is why we are running our Worried This Winter? campaign offering help with energy bills. https://www.cas.org.uk/worried.
Matthew Lee is senior policy officer for energy at Citizens Advice Scotland.
This article originally appeared in the Herald