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.
Nissan is set to announce a leap in its cost-cutting plans that will see 20,000 jobs go globally, according to reports in Japan.
The carmaker, which employs around 6,000 workers at its sprawling manufacturing operations in Sunderland, had already let it be known last November that 9,000 roles would be going amid weak sales and rising costs.
But Japanese broadcaster NHK said on Monday it expected that total to more than double.
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Nissan, which was yet to comment on the claim, is due to reveal full year results covering the 12 months to March on Tuesday morning.
They are expected to show a net loss of up to £3.8bn due to a series of writedowns on the value of its operations.
They will be the first results Nissan has declared since the appointment of a new chief executive last month.
Ivan Espinosa issued a “significant” downgrade to Nissan’s outlook just three weeks ago.
If the job cuts report is true, it would amount to a 15% reduction in the company’s worldwide workforce.
New models of the Nissan Juke being assembled at the Sunderland plant. Pic:PA
It is not known if the Sunderland production facilities form part of any planned job cuts or production reductions, of up to 20%, that were reported.
Nissan has, on several occasions since Brexit, called the plant’s future into question before proceeding with investment plans.
It has invested £2bn in Sunderland since 2023 alone.
The company secured UK government money this year for a new electric powertrain manufacturing facility in Sunderland.
But a senior Nissan executive, Alan Johnson, warned more aid was needed just last month, arguing that the UK was “not a competitive place” to build cars.
Nissan, like rivals, is facing challenges on many fronts.
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US trade tariffs of 25% on all car imports has exacerbated pressure on its supply chain and sales.
The latter has been struggling due to weaker-than-anticipated electric car uptake.
But the vast majority of its cars made in the UK will be subject to a tariff of just 10% after the UK-US trade deal agreed last week.
It does not currently send Sunderland-made cars to the United States. Most are for export to Europe and the domestic UK market.
The US and China have agreed to slash trade tariffs on each other, a move Donald Trump has said was part of a “total reset” in relations.
The president said the 90-day truce followed “very friendly” talks between the two sides in Switzerland over the weekend and those discussions would continue..
“China was being hurt very badly. They were closing up factories they were having a lot of unrest and they were very happy to do something with us”, he told reporters at the White House.
The breakthrough was announced early on Monday – to the delight of fincial markets – by the leader of the US delegation, treasury secretary Scott Bessent.
US trade representative Jamieson Greer confirmed so-called reciprocal tariffs were now at 10% each.
In real terms, it meant the US is reducing its 145% tariff to 30% on Chinese goods. A tariff of 20% had been implemented on China when President Donald Trump took office, over what his administration said was a failure to stop illegal drugs entering the US.
China has agreed to reduce its 125% retaliatory tariffs to 10% on US goods.
Sector-specific tariffs, such as the 25% tax on cars, aluminium and steel, remain in place.
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Tariffs, taxes on imports of more than 100%, had been imposed on both sides. China was the only country exempt from a 90-day pause on the “retaliatory” tariffs above the base 10% levies applied by America.
Major retailers had been warning Mr Trump of empty shelves as US importers pause shipments.
Mr Bessent said after a weekend of negotiations in Switzerland, the countries had a mechanism for continued talks.
It’s the second major trade announcement made by the US in the last week, after a deal was secured with the UK on Thursday.
The move signals a willingness from the Americans to make deals on tariffs.
Why Trump blinked in US-China trade war
Of all the fronts in Donald Trump’s trade war, none was as dramatic and economically threatening as the sky-high tariffs he imposed on China.
There are a couple of reasons: first, because China is and was the single biggest importer of goods into the US and, second, because of the sheer height of the tariffs imposed by the White House in recent months.
In short, tariffs of over 100% were tantamount to a total embargo on goods coming from the United States’ main trading partner.
That would have had enormous economic implications, not just for the US but every other country around the world (these are the world’s biggest and second-biggest economies, after all).
So the truce announced on Monday by treasury secretary Scott Bessent is undoubtedly a very big deal indeed.
Welcomed news
The news was received positively by Asian stock markets on Monday as major indexes were up.
In China, the Shanghai Composite stock index rose 0.8%, the Shenzhen Component gained 1.7%, and Hong Kong’s Hang Seng index was up nearly 3%.
In countries across Asia, benchmark stock indexes also rose. Korea’s Kospi grew 1.1%, Japan’s Nikkei was up 0.8%, while India’s Nifty 50 index of most valuable companies gained more than 3%.
US stocks rose sharply at the open.
The S&P 500 and tech-heavy Nasdaq saw their biggest leaps in more than a month, rising almost 3% and 4% respectively.
The market rally was visible in Europe too.
The dollar – hit in recent weeks by US recession speculation – was up more than a cent versus the pound while oil prices also rallied. Brent crude, the international benchmark, was 3.5% higher at $66 a barrel.
What next?
When asked by journalists about what the US wanted to see from China in the 90s, Mr Bessent said, “As long as there is good faith effort, engagement and constructive dialogue, then we will keep moving forward.”
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The UK came to the front of the line for deals, Mr Bessent added, “as our oldest ally”.
Switzerland had also moved to the “front of the queue”, he said, while the EU has been slower.
As with the other counties subject to 90-day pauses, a permanent deal will need to be reached, but confidence across the world is likely to have been boosted.
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Businesses now need a clear timetable and roadmap for future negotiations under the newly announced economic and trade consultation mechanism, said Andrew Wilson, the deputy secretary general of the International Chamber of Commerce.
“The credibility of that process for resolving underlying frictions in the Sino-US economic relationship will be mission-critical in terms of restoring business confidence.”
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