In August 2023, under Government direction, Ofgem sought to permanently end the premium placed on prepayment meter (PPM) customers, and carried out a Call for Evidence on levelling the cost of the standing charge across PPMs1. The decision on that Call for Evidence was still awaited as of January 2024, when Energy UK published its account of PPM policy and protections1.
The direction followed a period of regulatory action on PPMs. In February 2023 Ofgem investigated reports related to supplier practice and began a review of PPM licence conditions, and all suppliers paused involuntary installations as part of a market-wide moratorium1. 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 conditions, and in November 2023 confirmed it would determine on a supplier-by-supplier basis when 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.
On pricing, Energy UK states that prices for PPM customers are now the same as those of direct debit customers, where previously Ofgem's price cap meant PPM customers were paying more1. On the standing charge specifically, Energy UK records only that Ofgem carried out a Call for Evidence regarding levelling the cost of the standing charge across PPMs, and that the decision was awaited1. No outcome is given.
Energy UK sets out the protections attached to involuntary installation. PPMs should only be installed under warrant as a last resort and only where 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 those where occupants are over 75 and do not have support in the household1. Customers at risk of going off supply can request and receive credit from their supplier1.
"Under Government direction, Ofgem seeks to permanently end the premium placed on PPM customers."
Energy UK also reports that energy debt is at a record £2.9 billion, a figure that excludes money owed by direct debit customers, debt on PPMs, any debt less than 90 days old, and the final debt after a Change of Tenancy1. It estimates the actual amount owed to suppliers across the industry is 2.5 to 3.3 times higher than currently reported and rising fast1. Ofgem estimates that the moratorium on involuntary PPM installations added £25m per month of additional debt-related costs1.
| Date | Development |
|---|---|
| February 2023 | Ofgem investigates supplier practice and begins review of PPM licence conditions; all suppliers pause involuntary installations under a market-wide moratorium1 |
| April 2023 | Suppliers sign up to a new Code of Practice for involuntary PPM installation under warrant1 |
| August 2023 | Under Government direction, Ofgem seeks to permanently end the PPM premium; Call for Evidence on levelling the standing charge across PPMs1 |
| September 2023 | Ofgem confirms the Code of Practice is mandatory in supplier licence conditions1 |
| November 2023 | Ofgem confirms supplier-by-supplier determination on restarting installs1 |
| January 2024 | Suppliers meeting Ofgem's requirements granted permission to restart involuntary installations1 |
Why it matters for households
For a household on a prepayment and pay as you go tariff, the premium meant paying more for the same energy than a direct debit customer under the price cap. Ending it removes that gap on unit rates, though the standing charge is a separate element and the Call for Evidence on levelling it across PPMs had not produced a decision as of January 20241. Standing charges are fixed daily amounts that apply regardless of how much energy is used, and their treatment is set out in the standing charge rules and in proposals for standing charge reform.
The protections attached to involuntary installation bear on prepayment meters and vulnerable customer protections, and the restart conditions are administered by Ofgem through supplier licence conditions1. Energy UK notes that PPMs let customers pay for energy as they use it rather than building up credit, which it says helps reduce the chance of debt build-up, and that smart PPMs allow suppliers to see if a customer is at risk of self-disconnection1. It also states that debt is rising unsustainably across the industry and results in higher bills for all customers1.
What happens next
Energy UK records that the decision on Ofgem's Call for Evidence on levelling the standing charge across PPMs was awaited as of January 20241. It also states that the Government needs to deliver on its promise of a consultation addressing targeted bill support for vulnerable customers, funded progressively through general taxation rather than through bills1. No date for either is given.