Ofgem has opened an investigation into British Gas and launched a Market Compliance Review (MCR) into prepayment meter (PPM) practices, the regulator confirmed in a statutory consultation published on 28 June 20231. The consultation sets out proposals to strengthen protections for consumers who may be moved to a prepayment meter involuntarily, building on an Involuntary PPM Code of Practice published on 18 April 20231.
The regulator agreed a moratorium on involuntary PPM installations and smart meter remote mode switches with suppliers in February 20231. Ofgem said its monitoring in 2022 showed suppliers increased PPM installations to reduce the risk of writing off unrecoverable debt, with a 44% rise in smart mode switches and a 40% rise in traditional installations between 2021 and 20221. It has assumed that between 5% and 8% of meters were installed in this way1.
The consultation proposes introducing a new Standard Licence Condition (SLC) 28 to replace and combine existing SLCs 28 and 28B, alongside additions and modifications to SLC 27A1. Ofgem said the measure needs to be in place for winter 2023/241. Under the proposals, suppliers must not proceed with an involuntary PPM if a customer is in the "do not install" category, and must take additional precautions for those in the "further assessment needed" category1. Where a supplier does install a PPM, it must carry out a welfare visit, have the case independently assessed by another team or individual, and provide the customer with an initial £30 credit1.
"We launched an investigation into British Gas and we also launched a Market Compliance Review (MCR) looking at PPM"
Ofgem's impact assessment estimates the potential cost of the proposals at between £74m and £307m per year, or between £3 and £14 per household1. It estimates a benefit of £328m could be associated with the policy if it achieved a 4% reduction in excess winter deaths, with a high-sensitivity estimate of £676m1. Ofgem said its analysis shows a positive cost:benefit ratio of at least 1:8 under the most likely scenario and at least 1:2 under the high sensitivity scenario1. It also estimated that a full ban on new PPMs would result in £472m in additional bad debt, or £21 per customer1.
| Measure | Estimated impact |
|---|---|
| Proposals, central scenario | £307m, or £14 per household1 |
| Proposals, lower estimate | £74m, or £3 per household1 |
| Full ban on new PPMs | £472m, or £21 per customer1 |
| Benefit if 4% reduction in excess winter deaths | £328m1 |
Why it matters for households
A prepayment meter changes how a household pays for energy: credit is topped up in advance rather than billed afterwards, and supply can stop when the credit runs out. For a household moved onto a PPM without consent, that can mean rationing heating, cooking and hot water. Ofgem said some groups could experience an increase in energy use of up to 10%1. The proposals would require suppliers to check suitability more thoroughly before an involuntary installation and to provide aftercare support afterwards, which affects how much control a household retains over its own supply. The consultation also notes that suppliers' right to install a PPM for debt is set out in legislation, and that in the absence of PPMs suppliers would be likely to resort to alternative debt collection methods such as bailiff action1.
What happens next
The consultation's response deadline was 26 July 20231. Ofgem said it would publish non-confidential responses alongside a decision on next steps1. The regulator said the measure needs to be implemented so it is in place for winter 2023/241. The outcome of the investigation into British Gas and the Market Compliance Review has not been reported1. Ofgem's role and remit are set out in its regulatory framework.
Sources1 cited
- Statutory Consultation – Involuntary PPM, ofgem.gov.uk