It should have been possible to spot the tension a mile off. A combination of rising bills and falling real incomes would inevitably create pressure at the point in the energy system where affordability is most acute – prepayment meters.
So it has proved. The statistics last week from Citizens Advice, the statutory consumer body in the energy market, were stark. About 3.2 million people last year ran out of credit on their prepayment meter at some point because they couldn’t afford to top up. In the energy industry’s awkward euphemism, they “self-disconnected”. For most, it was not a one-off: 2 million people are being temporarily disconnected more than once a month.
Then the equally troubling finding: the pace at which customers are being shunted by suppliers from credit arrangements and on to prepayment meters. About 600,000 people were forced to make the switch in 2022, according to the report, a leap from 380,000 the previous year. The process, remember, is meant to be “a last resort”, as regulator Ofgem puts it – a mechanism to be adopted only when a supplier has taken “all reasonable steps” to agree a schedule to repay a debt.
And the most alarming aspect is that the group of enforced movers contained some people who are regarded as “vulnerable” – those who are disabled or with long-term health conditions, for instance. For this group, there is meant to be a ban on switching to a prepayment meter if the customer does not want one. The spread of smart meters, which can be switched remotely to prepayment mode, has added to the problem. Citizens Advice has stories of elderly individuals returning home from hospital to find their electricity has been turned off.
Has Ofgem grasped the scale of what’s happening? Its response to Citizens Advice’s report contained an obligatory note of outrage – “Customers in vulnerable circumstances being left without power for days or even weeks is completely unacceptable and we take this issue extremely seriously” – but the question is really whether the regulator has enforced the rules adequately.
Ofgem’s “market compliance review” last November, looking at how companies treat vulnerable customers, contained the remarkable conclusion that “all suppliers had issues to address”. There were differences between companies – thus the categorisation under “minor”, “moderate” and “severe” weaknesses – but nobody was classed as doing a good job.
That is hardly surprising when you read Citizens Advice’s account of what happened in November, a month after Ofgem had warned suppliers that not enough was being done to identify vulnerable customers before installation of a prepayment meter. “More than a third of prepayment meter households including a disabled person, or someone with a long-term health condition, were cut off from their energy supply at least once,” says the report. In hard numbers, that was 470,000 people.
Ofgem had a choice last autumn. It could have insisted on a halt to enforced prepayment switches until companies could show they could perform the process safely, which would have sent a stiff regulatory signal. Instead, it took the gentler path of continuing to prod and cajole suppliers to do better, with the threat of enforcement action largely being kept in reserve.
In Ofgem’s defence, one could say it also has a duty to keep a lid on bad debts in the sector and, since prepayment meters offer a means to that end, a time-out would have been a radical step. Yet one doesn’t have to stare at the current picture for long to think that radicalism is required.
On Citizens Advice’s account, which nobody is disputing in the round, one can see vulnerable customers being lost in the bureaucracy of having to apply to the “priority services register”; companies taking too little care to identify those who should be on the register but aren’t; and magistrates approving suppliers’ warrant applications in batches without bothering to look at individual circumstances.
The charity proposes a ban on prepayment installations until effective protections are put in place, which sounds proportionate. Think of it as a chance to reset and explore whether something has gone seriously wrong if there can be 600,000 “last resort” cases in a single year. “If Ofgem doesn’t act, the government must intervene,” says Clare Moriarty, the chief executive of Citizens Advice.
So far, Ofgem promises only to “consider the findings” in the report and “take further action as necessary”, which sounds suspiciously like kicking the can down the road. The regulator should reconsider. Yes, some customers prefer prepayment. But there is strong evidence that the industry’s blunt use of the meters has gone way beyond levels that were ever intended.
