Ofgem began a review of prepayment meter (PPM) licence conditions in February 2023, after investigating reports related to supplier practice1. In the same month, all suppliers paused involuntary installations as part of a market-wide moratorium1.
The review sat at the start of a sequence of changes to how prepayment meters and vulnerable customer protections operate. In April 2023, energy suppliers signed up to a new Code of Practice for the involuntary installation of PPMs under warrant, developed by Energy UK, Ofgem and the Government1. Ofgem confirmed in September 2023 that the Code had been made mandatory as part of the supplier licence conditions1. In November 2023, Ofgem confirmed it would determine on a supplier-by-supplier basis when the new stringent licence conditions had been met and suppliers were ready to restart installs1. In January 2024, suppliers that had satisfied Ofgem's requirements were granted permission to restart involuntary installations1.
"Ofgem investigates reports related to supplier practice and begins a review of PPM licence conditions."
Under the rules described, PPMs should only be installed under warrant as a last resort, and only after Ofgem's requirements are met, such as 10 attempts by the supplier to contact the customer and arrange a payment plan1. A "Do not install" category covers certain health issues, households with children under two, and households where occupants are over 75 and do not have support in the household1. Prices for PPM customers are now the same as those of direct debit customers; previously Ofgem's price cap meant PPM customers paid more1. Under Government direction, Ofgem has sought to permanently end the premium placed on PPM customers, and carried out a Call for Evidence on levelling the standing charge across PPMs, with the decision awaited1.
| Date | Change |
|---|---|
| February 2023 | Ofgem investigates supplier practice and begins review of PPM licence conditions; suppliers pause involuntary installations |
| April 2023 | Suppliers sign up to a new Code of Practice for involuntary PPM installation under warrant |
| August 2023 | Under Government direction, Ofgem seeks to permanently end the PPM premium; Call for Evidence on standing charges |
| September 2023 | Ofgem confirms the Code of Practice is mandatory in supplier licence conditions |
| November 2023 | Ofgem confirms supplier-by-supplier decisions on restarting installs |
| January 2024 | Suppliers meeting Ofgem's requirements granted permission to restart involuntary installations |
Energy UK states that energy debt is at a record £2.9 billion, a figure that excludes money owed by direct debit customers, debt on PPMs, debt less than 90 days old, and final debt after a change of tenancy1. It estimates the actual amount owed to suppliers is 2.5 to 3.3 times higher than currently reported and rising fast1. Ofgem estimates the moratorium on involuntary PPM installations added £25m per month of additional debt-related costs1. Energy UK also states the energy retail market has been loss-making on average over recent years1.
Why it matters for households
The licence conditions set the terms on which a supplier can move a household onto a prepayment meter without consent, and the review marked the point at which those terms came under scrutiny. For a household, the practical effect is a set of tests a supplier must pass before an involuntary installation: repeated contact attempts, a payment plan offer, and exclusion categories covering young children, older occupants without support, and certain health conditions1. PPMs mean customers pay for energy as they use it rather than building up credit or paying quarterly, which Energy UK says helps reduce the chance of debt build-up1. Smart PPMs allow suppliers to analyse data to identify customers at risk of self-disconnection, and allow customers with built-up debt to repay it in agreed fixed instalments1. Those at risk of going off supply can request and receive credit from their supplier1. The cost of unpaid debt is ultimately recouped from all customer bills, which links the level of debt in the market to the bills paid by households that are not in arrears1.
What happens next
Ofgem's decision on the Call for Evidence regarding levelling the standing charge across PPMs had not been published at the time of the Energy UK briefing1. Energy UK states the Government needs to deliver on its promise of a consultation addressing targeted bill support for vulnerable customers1. Ofgem will monitor individual suppliers to ensure the tests protecting customers are met1.