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.
The US ambassador to the UK has said Britain should carry out “more drilling and more production” in the North Sea.
In his first broadcast interview in the job, Warren Stephens urged the UK to make the most of its own oil and gas reserves to cut energy costs and boost the economy.
“Electricity costs are four times ours in the UK, versus the US,” he told Mornings with Ridge and Frost.
“I want the UK economy to be as strong as it possibly can be, so the UK can be the best ally to the US that it possibly can be.
“Having a growing economy is essential to that – and the electricity costs make it very difficult.”
Mr Stephens told Wilfred Frost he hoped Britain would “examine the policies in the North Sea and frankly, make some changes to it that allows for more drilling and more production”.
“You’re using oil and gas, but you’re importing it. Why not use your own?” he asked.
Mr Stephens said Britain should make more of its own oil and gas
The ambassador said he had held meetings with Sir Keir Starmer on the energy issue while US President Donald Trump was in the room, and that the prime minister was “absolutely” listening to the US view.
“I think there are members of the government that are listening,” Mr Stephens told Sky News. “There is a little bit of movement to make changes on the policy and I’ll hope that will continue.”
Energy Secretary Ed Miliband has said the UK should be prioritising net zero by 2030 to limit climate change, rather than issuing new oil and gas drilling licences.
The Thistle Alpha platform, north of Shetland, stopped production in 2020 . Pic: Reuters/Petrofac
However, the ambassador said it would take “all energy for all countries to compete” in the future, given the huge power demands of data centres and AI.
“I don’t think Ed Miliband is necessarily wrong,” said Mr Stephens. “But I think it’s an incorrect policy to ignore your fossil fuel reserves, both in the North Sea and onshore.”
The ambassador hosted Mr Trump on the first night of his second UK state visit in September – a trip that was seen as a success by both sides.
Mr Stephens said Mr Trump and Sir Keir had a “great relationship” and pointed to the historic ties between Britain and the US as a major factor in June’s trade deal and the favourable tariff rate on the UK.
The ambassador said Sir Keir and President Trump have a ‘great relationship’
“The president really loves this country,” the ambassador told Sky News.
“I don’t think it’s coincidental that the tariff rates on the UK are generally a third, or at worst half, of what a lot of other countries are facing.
“I think the prime minister and his team did a great job of positioning the United Kingdom to be the first trade deal, but also the best one that’s been struck.”
Mr Stephens – who began his job in London in May – also touched on the Ukraine war and said Mr Trump’s patience with Russia was “wearing thin”.
The Alaska summit between Mr Trump and Vladimir Putin failed to produce a breakthrough, and the US leader has admitted the Russian president may be “playing” him so he can continue the fighting.
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The ambassador told Sky News he had always favoured a tough stance on Russia and was “delighted” when Mr Trump sanctioned Russia’s two biggest oil firms a few weeks ago.
However, he emphasised the president’s call that other countries must stop buying Russian energy to really tighten the screw.
“The president, has been, I would say, careful in ramping up pressure on Russia. But I think his patience is wearing out,” said Mr Stephens.
“One of the problems is a lot of European countries still depend on Russian gas,” he added.
“We’re mindful of that. We understand that, but until we can really cut off their ability to sell oil and gas around the world, they’re going to have money and Putin seems intent on continuing the war.”
The ambassador also struck a cautious but hopeful tone on future US and UK relations with China.
It comes after Mr Trump said his meeting this week with President Xi Jinping was a “12/10”, raising hopes the trade war between the superpowers could be simmering down.
China’s huge economy is too big to ignore – but it remains a major spy threat; the head of MI5 warned last month of an increase in “state threat activity” from Beijing (as well as Russia and Iran).
Mr Stephens praised the country’s economy and said it would be “terrific” if China could one day be considered a partner.
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Trump-Xi meeting: Three key takeaways
But he warned “impatient” China is ruthlessly focused on itself only, and would like to see the US and the West weakened.
“There’s certainly things we want to be able to do with China,” added the ambassador.
“And I know the UK wants to do things with China. The United States does, too – and we should. But I think we always need to keep in the back of our mind that China does not have our interests at heart.”
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Ryanair’s boss has accused the chancellor of having no idea how to grow the UK economy as the airline reported hikes to fares had delivered a 42% rise in half-year profits.
Michael O’Leary told Sky’s Mornings with Ridge and Frost programme that Rachel Reeves “hasn’t the rashers how to deliver growth” while taking aim at a planned rise in air passenger duty slated for next April.
He called for the hike, revealed at her first budget last October, to be reversed in her speech to the Commons on 26 November – a budget business believes could further harm investment in jobs and growth.
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“Until she starts cutting these insane taxes and stop trying to tax wealth, the UK economy is doomed to continue to fail”, he said.
“But, in a bizarre way, that’s probably good for Ryanair’s business because as people get more price sensitive, more and more of them will fly Ryanair,” he concluded.
Mr O’Leary was speaking after the no frills carrier, which is Europe’s largest airline by passenger numbers, reported profit after tax in the six months to the end of September came in at €2.54bn (£2.2bn).
The better-than-expected sum followed a second quarter recovery for fares – the cost of a seat before add-ons – in the wake of a 7% decline across its last financial year.
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Ryanair said revenues per passenger were up 9% over the six months, helped by a 13% rise in fares and higher revenues from additional things like baggage fees and seat selection.
It reported record passenger numbers of 119 million for the half year – the summer season that tends to be the most profitable – and guided that fares, despite some discounting, were on track to end the financial year on a positive footing.
The airline raised its passenger traffic forecast due to earlier-than-expected deliveries of more efficient Boeing aircraft and strong first-half demand.
Ryanair said it expected to fly 207 million passengers in the year to the end of March, up from an earlier forecast of 206 million.
Mr O’Leary told investors: “While Q3 forward bookings are slightly ahead of (PY) prior year, particularly across the Oct. mid-term and Christmas peaks, we would caution that we face more challenging PY fare comps in H2 (second half) making fare growth more challenging”.
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