Ofgem consults on new involuntary PPM requirements

Ofgem published a statutory consultation on 28 June 2023 proposing to write its Involuntary PPM Code of Practice into electricity and gas standard supply licence conditions (SLCs)¹. The consultation closes on 26 July 2023¹. It follows a moratorium agreed with suppliers in February 2023 on involuntary prepayment meter installations and smart meter remote mode switches, and the Code of Practice published on 18 April 2023¹.

The regulator said it is consulting on how to integrate the Code agreed by suppliers into licence conditions¹. Its proposals include a new SLC 28 that would replace and combine existing SLCs 28 and 28B, alongside additions and modifications to SLC 27A¹. Under the proposed drafting, a licensee must not install an involuntary prepayment meter unless each of the requirements set out in guidance issued under SLC 28.4 is satisfied¹. Ofgem said the measures need to be in place for winter 2023/24¹.

The consultation sets out elements of the proposed process. Suppliers would have to check a customer's suitability before an involuntary installation, must not proceed where a customer falls into a "do not install" category, and should take additional precautions for those in a "further assessment needed" category¹. Where a supplier does want to install a meter, it would need to carry out a welfare visit and have the case independently assessed by another team or individual, and provide the customer with an initial £30 credit¹. The document also covers a debt completion assessment, the precautionary principle, ability to pay, smart meters, information provision and post-installation care¹.

Ofgem's impact assessment puts the potential effect on bad debt at between £74m and £307m per year, or between £3 and £14 per household, using two calculation methods¹. It said its current expectation is that the impact sits towards the lower end of that range in a central scenario¹. A full ban on new prepayment meter installations would cost more, with bad debt estimated to rise by between £472m and £599m, or £21 to £27 per household¹. Ofgem also said the moratorium, described as equivalent to a full ban on installations, increased bad debt costs by between £25m and £30m per month in February and March 2023¹. It quantified the consumer cost:benefit ratio at at least 1:8 under the most likely scenario and at least 1:2 under a high sensitivity scenario¹.

The consultation records that in January 2023 further allegations were made about supplier prepayment meter practices, that Ofgem launched an investigation into British Gas and a Market Compliance Review looking at prepayment meters¹. It states that monitoring in 2022 showed suppliers increased installations, with a 44% rise in smart mode switches and 40% in traditional installations between 2021 and 2022¹. Ofgem said it introduced rules on installations under warrant in 2017 and extended those protections in 2020 up to 2025 to tie in with the completion of the smart meter rollout¹.

Why it matters for households

The proposals concern households that suppliers move onto a prepayment meter without their consent, typically where there is debt. If the Code becomes licence conditions, the process a supplier must follow before such an installation, and the support provided afterwards, would be set in the supply licence rather than in a voluntary code¹. The £30 initial credit, welfare visit and independent case assessment would apply where a supplier proceeds with an installation¹. Ofgem said the measures are intended to be in place for winter 2023/24¹.

The cost figures matter to all billpayers, not only those facing an involuntary installation. Ofgem states that bad debt is otherwise recovered from all consumers through the price cap and non-price cap practices¹. Its central estimate of the proposals' impact is £3 per household per year at the lower end of the range, rising to £14 per household at the upper end, against a full ban at £21 to £27 per household¹. The consultation also cites wider health effects, including an estimate that the NHS spends at least £2.5 billion per year treating illnesses directly linked to cold, damp and dangerous homes, and an estimated 32,058 excess winter deaths in England in 2020-21¹.

What happens next

The consultation runs until 26 July 2023¹. Ofgem said that once the consultation closes it will consider all responses and publish non-confidential responses alongside a decision on next steps on its website¹. The regulator has said the measure needs to be implemented so it is in place for winter 2023/24¹. The outcome of the Market Compliance Review into prepayment meter practices and the investigation into British Gas has not been reported in the consultation document¹. How new rules of this kind are made, and how consumers and organisations can respond, is set out in our guide to consultations and discussion papers.