Ofgem agreed a moratorium on involuntary prepayment meter (PPM) installations and smart meter remote mode switches with energy suppliers in February 2023, the regulator has confirmed. The pause followed evidence that suppliers may not always have been complying with rules on moving customers onto PPMs without consent1. Ofgem also launched a Market Compliance Review into involuntary PPM practices and opened an investigation into British Gas1.
The moratorium was set out in a statutory consultation published on 28 June 2023, which proposed strengthening protections for consumers who may be moved to a PPM involuntarily. Ofgem said it had built on the Involuntary PPM Code of Practice it published on 18 April 2023, and that it was consulting on turning that code into licence conditions and guidance1. The proposals include a new Standard Licence Condition 28, replacing and combining existing conditions 28 and 28B, alongside changes to condition 27A1. Ofgem said the measure needed to be in place for winter 2023/241.
"in February 2023 we agreed a moratorium on Involuntary PPM installations and smart meter remote mode switches with suppliers"
Ofgem's monitoring showed a 44% increase in smart mode switches and a 40% increase in traditional PPM installations between 2021 and 20221. The regulator said it had assumed between 5% and 8% of meters were installed in this way, and that the moratorium increased bad debt costs by between £25m and £30m per month in February and March 20231. Its impact assessment put the potential cost of the proposals at between £74m and £307m per year, or between £3 and £14 per household, with a full ban on new PPMs estimated at £472m to £599m in additional bad debt, or £21 to £27 per household1. Ofgem estimated a benefit of £328m could be associated with the policy if it achieved a 4% reduction in excess winter deaths1.
A separate Ofgem consultation published on 12 October 2023 examined whether the default tariff cap should be adjusted for additional debt-related costs, including costs arising from the moratorium. It noted that energy debt and arrears totalled over £2.6bn, and that the debt-related costs allowance represented approximately 6% of typical dual fuel standard credit bills, 1% of typical dual fuel direct debit bills and 1% of typical dual fuel PPM bills for cap period 11a (October to December 2023)2. Ofgem had already set a temporary allowance for additional support credit bad debt costs between cap periods 11a and 12b worth £8.77 per typical dual fuel customer, following an August 2023 decision2.
Why it matters for households
The moratorium means that, during the pause, a household could not be moved onto a prepayment meter without consent, and a smart meter could not be switched remotely into prepayment mode, where suppliers were signed up to the agreement. Ofgem's rules already required suppliers not to install a PPM where it would not be safe, for example where a customer depends on electrically powered medical equipment1. The proposed licence conditions would require suppliers to follow an enhanced assessment process, carry out a welfare visit and have cases independently assessed before installation, and provide an initial £30 credit where a PPM is installed1. For a household, the practical effect is that the route to a prepayment meter for debt becomes slower and more conditional, while the costs suppliers incur from unpaid bills continue to be recovered through the price cap, which is why the two consultations are linked.
What happens next
The statutory consultation on involuntary PPM closed on 26 July 20231. The debt-related costs allowance consultation ran from 12 October 2023 to 2 November 20232. Ofgem said it would not have actual data on any under or over allowance for debt-related costs in cap periods 11a and 11b until at least the October 2024 price cap2.
Sources2 cited
- Statutory Consultation – Involuntary PPM, ofgem.gov.uk
- Additional debt-related costs allowance policy consultation, ofgem.gov.uk