Why the problem of prepayment meters won’t go away for vulnerable energy customers
One thing the energy industry agrees on in theory – if not, it turns out, in practice – is that forcing prepayment meters on vulnerable customers is unacceptable.
The widespread revulsion at British Gas debt collectors forcing entry to the homes of families is deserved and universal.
Less clear-cut is what to do about the underlying cause.
The industry calls it the “affordability crisis” but those facing the reality know it simply as poverty.
Forced installation of prepayment meters (PPMs) is a miserable practice that, until the energy crisis, existed at the margins, affecting only the poorest or most reluctant of bill payers.
The explosion in energy prices has pushed it closer to the mainstream.
PPMs are supposed to be a last-resort in response to a challenge that has always faced utility providers; what to do about those households who cannot or will not pay their bills, and who continue to run up unsustainable debt?
Forty years ago, when gas and electricity meters were commonplace and tampering was a criminal, occasionally fatal, offence, affordability was self-regulating. If you did not have 50p to feed the meter the lights stayed off.
In the age of near universal connection the responsibility for balancing ability and willingness to pay, and the right to essential utilities, lies with the energy companies themselves.
It’s an issue the regulator Ofgem has grappled with since its inception.
An ongoing issue for Ofgem
In 2009 it asked suppliers not to disconnect pensioners or any home with under-18s in the coldest months between October and March, and to reconnect anyone inadvertently cut off within 24 hours.
In the last decade PPMs have been the mechanism for managing debt. They are supposed to prevent customers from going deeper into arrears by requiring them to pay upfront with payment cards or emergency credit from suppliers.
In practice they are a digital version of the old coin meters. Those who cannot pay end up self-disconnecting.
Read more:
British Gas prepayment allegations – what you need to know
How do prepayment meters work and what are the rules?
Ofgem’s licence conditions have banned forced installation for vulnerable customers since 2018, and “suppliers must not disconnect certain vulnerable customers during the winter, or disconnect anybody whose debt the supplier has not taken all reasonable steps to recover first by using a PPM”.
That was plainly not the case in the British Gas examples highlighted by The Times, but it should be said even Ofgem believes PPMs have a place.
Support for prepay meters
Its chief executive Jonathan Brearley told MPs this week they were a reasonable recourse for customers who can pay but will not.
Underlying that is the reasonable assumption that suppliers should get paid, and that they have a responsibility to ensure customers do not run up unsustainable debts.
The practical challenge of the current crisis is straining those principles.
Please use Chrome browser for a more accessible video player
The boss of British Gas’ owner, Centrica, has said
The energy industry and charities estimate up to 40% of households are spending more than 10% of their income on energy.
Ofgem’s own figures show close to one million people are in arrears on electricity payments and nearly 800,000 for gas, with no agreed plan to manage debt reduction.
The least well-off customers are routinely offered payment plans or emergency credit, around half of which is never repaid.
Retail suppliers privately say they cannot afford to offer such support on the scale that may currently be required.
Industry sources say the collective debt book is thought to run to around £2.5bn – around £2bn of which is considered bad debt.
The week that Shell announced profits of more than £32bn is a tough one in which to plead poverty, but the retail industry is separate from energy production, with regulated prices that have seen almost 30 companies forced out of business in the last 18 months.
A watershed moment for those in the market to reconsider?
That’s why, with wholesale prices falling, suppliers are calling on government to cancel a scheduled reduction in energy support that will increase prices, and distress to the poorest households, from April.
There’s little question that for those on the receiving end, forced installation of a PPM is a dehumanising bureaucratic device.
It’s possible too that anyone who runs up unsustainable debts heating their home satisfies a definition of vulnerability.
The industry-wide pause on using court warrants gives everyone with a stake in the market a chance to reconsider and may prove a watershed but there are no easy options or solutions.
Ofgem has recently argued for a subsidised social tariff, offering cheaper rates to defined vulnerable groups. The review of PPMs may also ask if it is ever okay to allow someone to be cut off.
Water companies cannot turn off the taps, but if the same applied to energy, how can commercial supply be sustainable in a medium term of elevated energy costs?
A meaningful review will have to examine the court process, which since the cost of living crisis has seen magistrates asked to approve hundred of warrants at a time and take suppliers at their word that due diligence has been done.
Unless government legislates to remove suppliers right to access customers homes the court process will be central to reform.
Centrica chief executive Chris O’Shea said this week that the plight of his energy customers was symptomatic of a wider affordability crisis for basic essentials, including housing.
As the man ultimately responsible for British Gas’s actions he may not be the most sympathetic witness, and the answer can never be to drill the locks of the disabled, but he had a point.
Shares in The Magnum Ice Cream Company (TMICC) have fallen slightly on debut after the completion of its spin-off from Unilever amid a continuing civil war with one of its best-known brands.
Shares in the Netherlands-based company are trading for the first time following the demerger.
It creates the world’s biggest ice cream company, controlling around one fifth of the global market.
Primary Magnum shares, in Amsterdam, opened at €12.20 – down on the €12.80 reference price set by the EuroNext exchange, though they later settled just above that level, implying a market value of €7.9bn – just below £7bn.
The company is also listed in London and New York.
Money latest: The cheapest days to travel by plane
Unilever stock was down 3.1% on the FTSE 100 in the wake of the spin off.
The demerger allows London-headquartered Unilever to concentrate on its wider stable of consumer brands, including Marmite, Dove soap and Domestos.
The decision to hive off the ice cream division, made in early 2024, gives a greater focus on a market that is tipped to grow by up to 4% each year until 2029.
Ben & Jerry’s accounts for a greater volume of group revenue now under TMICC. Pic: Reuters
But it has been dogged by a long-running spat with the co-founders of Ben & Jerry’s, which now falls under the TMICC umbrella and accounts for 14% of group revenue.
Unilever bought the US brand in 2000, but the relationship has been sour since, despite the creation of an independent board at that time aimed at protecting the brand’s social mission.
The most high-profile spat came in 2021 when Ben & Jerry’s took the decision not to sell ice cream in Israeli-occupied Palestinian territories on the grounds that sales would be “inconsistent” with its values.
Unilever responded by selling the business to its licensee in Israel.
A series of rows have followed akin to a tug of war, with Magnum refusing repeated demands by the co-founders of Ben & Jerry’s to sell the brand back.
Please use Chrome browser for a more accessible video player
Sept: ‘Free Ben & Jerry’s’
Magnum and Unilever argue its mission has strayed beyond what was acceptable back in 2000, with the brand evolving into one-sided advocacy on polarising topics that risk reputational and business damage.
TMICC is currently trying to remove the chair of Ben & Jerry’s independent board.
It said last month that Anuradha Mittal “no longer meets the criteria” to serve after internal investigations.
An audit of the separate Ben & Jerry’s Foundation, where she is also a trustee, found deficiencies in financial controls and governance. Magnum said the charitable arm risked having funding removed unless the alleged problems were addressed.
The Reuters news agency has since reported that Ms Mittal has no plans to quit her roles, and accused Magnum of attempts to “discredit” her and undermine the authority of the independent board.
Magnum boss Peter ter Kulve said on Monday: “Today is a proud milestone for everyone associated with TMICC. We became the global leader in ice cream as part of the Unilever family. Now, as an independent listed company, we will be more agile, more focused, and more ambitious than ever.”
Commenting on the demerger, Hargreaves Lansdown equity analyst Aarin Chiekrie said: “TMICC is already free cash flow positive, and profitable in its own right. The balance sheet is in decent shape, but dividends are off the cards until 2027 as the group finds its footing as a standalone business.
“That could cause some downward pressure on the share price in the near term, as dividend-focussed investment funds that hold Unilever will be handed TMICC shares, the latter of which they may be forced to sell to abide by their investment mandate.”
Donald Trump has said he will be “involved” in the decision on whether Netflix should be allowed to buy Warner Bros, as the $72bn (£54bn) deal attracts a media industry backlash.
The US president acknowledged in remarks to reporters there “could be a problem”, acknowledging concerns over the streaming giant’s market dominance.
Crucially, he did not say where he stood on the issue.
Money latest: The cheapest days to travel by plane
It was revealed on Friday that Netflix, already the world’s biggest streaming service by market share, had agreed to buy Warner Bros Discovery’s TV, film studios and HBO Max streaming division.
The deal aims to complete late next year after the Discovery element of the business, mainly legacy TV channels showing cartoons, news and sport, has been spun off.
But the deal has attracted cross-party criticism on competition grounds, and there is also opposition in Hollywood.
Please use Chrome browser for a more accessible video player
Netflix agrees $72bn takeover of Warner Bros
The Writers Guild of America said: “The world’s largest streaming company swallowing one of its biggest competitors is what antitrust laws were designed to prevent.
“The outcome would eliminate jobs, push down wages, worsen conditions for all entertainment workers, raise prices for consumers, and reduce the volume and diversity of content for all viewers.”
File pic: Reuters
Republican Senator, Roger Marshall, said in a statement: “Netflix’s attempt to buy Warner Bros would be the largest media takeover in history – and it raises serious red flags for consumers, creators, movie theaters, and local businesses alike.
“One company should not have full vertical control of the content and the distribution pipeline that delivers it. And combining two of the largest streaming platforms is a textbook horizontal Antitrust problem.
“Prices, choice, and creative freedom are at stake. Regulators need to take a hard look at this deal, and realize how harmful it would be for consumers and Western society.”
Paramount Skydance and Comcast, the parent company of Sky News, were two other bidders in the auction process that preceded the announcement.
The Reuters news agency, citing information from sources, said their bids were rejected in favour of Netflix for different reasons.
Paramount’s was seen as having funding concerns, they said, while Comcast’s was deemed not to offer so many earlier benefits.
Paramount is run by David Ellison, the son of the Oracle tech billionaire Larry Ellison, who is a close ally of Mr Trump.
The president said of the Netflix deal’s path to regulatory clearance: “I’ll be involved in that decision”.
On the likely opposition to the deal. he added: “That’s going to be for some economists to tell. But it is a big market share. There’s no question it could be a problem.”
-
Sports2 years agoStory injured on diving stop, exits Red Sox game
-
Sports3 years ago‘Storybook stuff’: Inside the night Bryce Harper sent the Phillies to the World Series
-
Sports2 years agoGame 1 of WS least-watched in recorded history
-
Sports3 years agoButton battles heat exhaustion in NASCAR debut
-
Sports3 years agoMLB Rank 2023: Ranking baseball’s top 100 players
-
Sports4 years ago
Team Europe easily wins 4th straight Laver Cup
-
Environment3 years agoJapan and South Korea have a lot at stake in a free and open South China Sea
-
Environment1 year agoHere are the best electric bikes you can buy at every price level in October 2024