Ofgem published a statutory consultation on 28 June 2023 setting out proposals to strengthen protections for consumers who may be moved to a prepayment meter (PPM) without their consent1. The regulator said it was building on the Involuntary PPM Code of Practice it published on 18 April 2023, and that it needs to implement the measure so it is in place for winter 2023/241. Responses close on 26 July 20231.
The consultation proposes a new standard licence condition, SLC 28, which would replace and combine existing SLCs 28 and 28B, alongside additions and modifications to SLC 27A1. Under the draft condition, "A licensee must not install an Involuntary Prepayment Meter unless, in accordance with the guidance issued under SLC 28.4, each of the following requirements are satisfied"1. Suppliers would have to follow an enhanced assessment process, carry out a welfare visit, have the case independently assessed by another team or individual, and provide an initial £30 credit where a PPM is installed1. Customers in the "do not install" category must not be moved to a PPM, and additional precautions apply to those in the "further assessment needed" category1.
Ofgem set out its cost and benefit estimates. It put the potential impact on bad debt at between £74m and £307m per year, or between £3 and £14 per household, using two calculation methods, and said its current expectation is towards the lower end of that range1. It estimated the administrative cost of dealing with bad debt would rise by £12m, or £0.50 per household1. For the "further assessment needed" group alone, it estimated £37m, or £2 per customer1. A full ban on new PPMs would, it said, result in £472m in additional bad debt, or £21 per customer1. On benefits, Ofgem said its most likely estimate is £328m, with a high-sensitivity estimate of £676m, and that £328m could be associated with the policy if it achieved a 4% reduction in excess winter deaths1. It quantified the consumer cost:benefit ratio at at least 1:8 under the most likely scenario and at least 1:2 under the high sensitivity scenario1.
The background is a rise in involuntary moves. Ofgem said its monitoring showed a 44% increase in smart mode switches and 40% in traditional installations between 2021 and 2022, and that it assumed between 5% and 8% of meters were installed in this way1. It said it agreed a moratorium on involuntary PPM installations and smart meter remote mode switches with suppliers in February 2023, launched a Market Compliance Review and opened an investigation into British Gas1. It also said the moratorium period increased bad debt costs by between £25m and £30m per month in February and March 20231.
"We are consulting on proposals to strengthen protections for consumers that may be moved to a prepayment meter (PPM) involuntarily"
Why it matters for households
A prepayment meter changes how a home pays for energy: credit is bought in advance, and supply stops when the balance runs out. For a household already in debt, an involuntary move can mean the difference between a managed repayment and self-disconnection. The consultation matters because it would put the April 2023 Code of Practice into enforceable licence conditions, so the protections would no longer rest on voluntary supplier agreement. The moratorium agreed in February 2023 is temporary; the proposed SLC 28 is intended to outlast it.
The practical effects described in the document are specific. A household in the "do not install" category, which includes people dependent on electrically powered medical equipment, would be protected from an involuntary installation1. Those in the "further assessment needed" category would face extra checks before any move1. Where a meter is installed, the £30 credit provides some initial credit on the meter1. The consultation also covers smart meters switched to prepay mode without consent, the route by which many recent involuntary moves were made1.
The costs fall on bills as well as on suppliers. Ofgem's central estimate of £3 per household per year, and its higher estimate of £14, reflect additional bad debt recovered through the price cap and other means1. The regulator's position is that the benefit estimate, at £328m most likely, exceeds these costs1. The document also notes that some groups could experience an increase in energy use of up to 10%1, and that impacts range from -£9 to -£23 depending on consumer archetype for households not in scope1. Ofgem's supplier conduct rules on prepayment and debt are the wider framework this sits within.
What happens next
The consultation closes on 26 July 20231. Ofgem said it will consider all responses and publish non-confidential responses alongside a decision on next steps on its website1. The stated aim is for the measure to be in place for winter 2023/241. The Market Compliance Review into involuntary PPM practices and the investigation into British Gas were both launched and remain separate from this consultation; no outcome for either is given in the document1.
Sources1 cited
- Statutory Consultation – Involuntary PPM, ofgem.gov.uk