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.
KitKats, Gaviscon, toothpaste, and even Freddo have all fallen victim to shrinkflation, consumer group Which? has found.
As families struggle with the cost of a trip to the supermarket, a survey of shoppers revealed how many products are getting smaller – while others are being downgraded with cheaper ingredients.
Among the examples are:
• Aquafresh complete care original toothpaste – from £1.30 for 100ml to £2 for 75ml at Tesco, Sainsbury’s and Ocado
• Gaviscon heartburn and indigestion liquid – from £14 for 600ml to £14 for 500ml at Sainsbury’s
• Sainsbury’s Scottish oats – from £1.25 for 1kg to £2.10 for 500g
• KitKat two-finger multipacks – from £3.60 for 21 bars to £5.50 for 18 bars at Ocado
• Quality Street tubs – from £6 for 600g to £7 for 550g at Morrisons
• Freddo multipacks – from £1.40 for five bars to £1.40 for four bars at Morrisons, Ocado and Tesco
Which? also received reports of popular treats missing key ingredients, as manufacturers seek to cut costs.
The amount of cocoa butter in white KitKats has fallen below 20%, meaning they can no longer actually be sold as white chocolate.
It comes after Penguin and Club bars lost their legal status as a chocolate biscuit, as they now contain more palm oil and shea oil than cocoa – as reported in the Sky News Money blog.
Which? retail editor Reena Sewraz called on supermarkets to be “more upfront” about price changes to help households “already under immense financial pressure” get better value.
While keeping track of the size and weight of products can be tricky, Which? has two top tips for detecting shrinkflation.
The first is to be wary of familiar products labelled as “new” – because the only thing that’s new may end up being the smaller size.
Meanwhile, the second is to pay attention to how much an item costs per 100g or 100ml, as this can be an easy way of finding out when prices change.
What have the companies said?
A spokeswoman for Mondelez International, which makes Cadbury products, said any change to product sizes are a “last resort”, but it’s facing “significantly higher input costs across our supply chain” – including for energy.
A Nestle spokesman said it was seeing “significant increases in the cost of coffee”, and some “adjustments” were occasionally needed “to maintain the same high quality and delicious taste that consumers know and love”.
“Retail pricing is always at the discretion of individual retailers,” they added.
A spokesman for the Food and Drink Federation also pointed to government policy, notably national insurance increases for employers and a new packaging tax.
Please use Chrome browser for a more accessible video player
Is inflation reaching its peak?
Fresh food prices on the rise
The Which? report comes as latest figures showed fresh food costs 4.3% more than it did a year ago.
The increase in October, reported by the British Retail Consortium (BRC) and market researchers NIQ, was up on the 4.1% year-on-year rise in September.
Overall food inflation was down slightly, though, to 3.7% from last month’s 4.2%.
Read more from Sky News:
Surprise move for Costa Coffee
Start-ups issue warning to Reeves
There has also been a slowdown in overall shop price inflation, which the BRC said was down to “fierce competition among retailers” ahead of Black Friday sales.
The annual shopping extravaganza will this year arrive in the same week as the chancellor’s budget, which is set for Wednesday 26 November.
BRC chief executive Helen Dickinson called on Rachel Reeves to help “relieve some pressures” keeping prices high, with the national insurance rise in last year’s budget having “directly contributed to rising inflation”.
“Adding further taxes on retail businesses would inevitably keep inflation higher for longer,” Ms Dickinson warned.
Business
Petrofac administration not a great start to the week for Ed Miliband though relief could come
More than 2,000 Scotland-based jobs are at risk as oil and energy services group Petrofac has applied for administration.
The group’s operations will continue to trade, and options for restructuring of the company and a possible merger or acquisition are being actively explored with its key creditors, the company said on Monday.
People close to the company say they are hopeful a buyer can be found swiftly for its North Sea operations, with one suggesting that it could even happen in the coming days.
Money blog: ‘We protect the UK, our salaries can be limitless’
Administrators will work alongside company management to “preserve value, operational capability and ongoing delivery”, its announcement read.
News of a possible insolvency announcement was first reported by Sky News.
Energy Secretary Ed Miliband and other ministers have been briefed on the situation.
An advisory firm, Kroll, had been engaged by the Department for Energy Security and Net Zero to work with ministers and officials on the unfolding crisis for the company.
What is Petrofac?
Petrofac employs about 7,300 people globally, according to a recent stock exchange filing.
It designs, constructs and operates offshore equipment for energy companies.
The company has been valued at more than £6bn but has been struggling with debt.
It also faced a Serious Fraud Office investigation, which resulted in a 2021 conviction for failing to prevent bribery, and the payment of millions of pounds in penalties.
Please use Chrome browser for a more accessible video player
Ed Miliband ‘welcomes’ challenge from Jeremy Clarkson for seat in parliament
Founded in 1981 in Texas, the business has been in talks about a far-reaching financial restructuring for more than a year.
A formal restructuring plan was sanctioned by the High Court in May this year with the aim of writing off much of its debt and injecting new cash into the business.
This was subsequently overturned, prompting talks with creditors about a revised agreement.
-
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
-
Environment2 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