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.
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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.
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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.
Four people have been arrested by police investigating cyber attacks targeting M&S, Co-op and Harrods.
A 20-year-old woman and two males, both aged 19, and a male aged 17, were detained in London and the West Midlands this morning as part of a National Crime Agency (NCA) operation.
They were arrested at their homes on suspicion of Computer Misuse Act offences, blackmail, money laundering and participating in the activities of an organised crime group.
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Electronic devices were seized from the suspects and are currently being analysed by forensic experts.
M&S halted online orders, and shelves were empty in shops after the cyber attack on the retailer earlier this year.
The initial hack into the retailer’s systems took place in April through “sophisticated impersonation” involving a third party.
Disruption is expected to continue at the retailer until the end of this month.
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Mickey Carroll in May answered why M&S cyber attack was so bad.
The Co-op and Harrods were also subsequently targeted by hackers.
Paul Foster, head of the NCA’s National cybercrime unit described the arrests as a “significant step” in their investigation, which remains “one of the Agency’s highest priorities”.
He added: “…our work continues, alongside partners in the UK and overseas, to ensure those responsible are identified and brought to justice.”
The National Crime Agency is keen to “signal” to “future victims” the “importance of seeking support and engaging with law enforcement”, stating that “the NCA and policing are here to help”.
The NCA has also thanked M&S, Co-op and Harrods for their support in their investigations.
The arrests, which took place early on Thursday morning, were supported by officers from the West Midlands Regional Organised Crime Unit and the East Midlands Special Operations Unit.
Earlier this week, the chairman of M&S told MPs that the hack had been “traumatic” and like an “out-of-body experience”.
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Archie Norman, however, refused to be drawn on whether the retailer had paid any ransom.
“We are not discussing any of the details of our interaction with the threat actor, including this subject, but that subject is fully shared with the NCA,” he said.
It is estimated that the cyber attack will cost M&S up to £300m this year.
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Days after M&S was attacked, the Co-op was targeted and forced to shut down some internal systems.
Harrods was then hacked, and also had to shut some systems despite its website and shops continuing to operate.
Of those arrested, a 17-year-old British male and a 19-year-old Latvian male were from the West Midlands.
A 19-year-old man was from London and a 20-year-old woman from Staffordshire.
Royal Mail is to be allowed to scrap Saturday second-class stamp deliveries, under a series of reforms proposed by the communications regulator.
From 28 July, Royal Mail will also be allowed to deliver second-class letters on alternate weekdays, Ofcom said.
The post will still be delivered within three working days of collection from Monday to Friday.
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The proposals had already been raised by Ofcom after a consultation was announced in 2024, and the scale back was proposed early this year.
Royal Mail had repeatedly failed to meet the so-called universal service obligation to deliver post within set periods of time.
Those delivery targets are now being revised downwards.
Rather than having to have 93% of first-class mail delivered the next day, 90% will be legally allowed.
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The sale of Royal Mail was approved in December
The target for second-class mail deliveries will be lowered from 98.5% to arrive within three working days to 95%.
A review of stamp prices has also been announced by Ofcom amid concerns over affordability, with a consultation set to be launched next year.
It’s good news for Royal Mail and its new owner, the Czech billionaire Daniel Kretinsky. Ofcom estimates the changes will bring savings of between £250m and £425m.
A welcome change?
Unsurprisingly, the company welcomed the announcement.
“It is good news for customers across the UK as it supports the delivery of a reliable, efficient and financially sustainable universal service,” said Martin Seidenberg, the group chief executive of Royal Mail’s parent company, International Distribution Services.
“It follows extensive consultation with thousands of people and businesses to ensure that the postal service better reflects their needs and the realities of how customers send and receive mail today.”
Citizens Advice, however, doubted whether services would improve as a result of the changes.
“Today, Ofcom missed a major opportunity to bring about meaningful change,” said Tom MacInnes, the director of policy at Citizens Advice.
“Pushing ahead with plans to slash services and relax delivery targets in the name of savings won’t automatically make letter deliveries more reliable or improve standards.”
Acknowledging long delays “where letters have taken weeks to arrive”, Ofcom said it set Royal Mail new enforceable targets so 99% of mail has to be delivered no more than two days late.
Changing habits
Less than a third of letters are sent now than 20 years ago, and it is forecast to fall to about a fifth of the letters previously sent.
According to Ofcom research, people want reliability and affordability more than speedy delivery.
Royal Mail has been loss-making in recent years as revenues fell.
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In response to Ofcom’s changes, a government spokesperson said: “The public expects a well-run postal service, with letters arriving on time across the country without it costing the earth. With the way people use postal services having changed, it’s right the regulator has looked at this.
“We now need Royal Mail to work with unions and posties to deliver a service that people expect, and this includes maintaining the principle of one price to send a letter anywhere in the UK”.
Ofcom said it has told Royal Mail to hold regular meetings with consumer bodies and industry groups to hear their experiences implementing the changes.
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