Energy suppliers sign up to new Code of Practice on involuntary prepayment installations
Yesterday, all British domestic energy suppliers have signed up to an updated Code of Practice and tougher Ofgem oversight of prepayment meters (PPMs) that are enforced under warrant installations or remotely switched without consent (all involuntary installations).
The Code of Practice sets out clear procedures that suppliers must follow, strengthening protections for customers in vulnerable situations.
The new Code was developed in consultation with Citizens Advice, Energy UK and other key stakeholders. Implementation of the Code will be subject to new detailed monitoring by energy regulator Ofgem.
Ofgem requires suppliers to work with, and support customers, who are struggling to pay their bills, to limit the build-up of bad debt, for the benefit of all consumers.
Although PPMs can often be helpful for people to manage bills, they need to be used fairly and are not suitable for some vulnerable consumers.
Ofgem is already investigating suspected poor practice in this area, including through a market-wide review.
The Code builds on existing protections by setting out more specific high-risk categories, where involuntary installations should be banned. It also clarifies that every single involuntary installation is always the last resort, when all other options have been exhausted – and only where it is safe and practicable to do so.
Suppliers should not restart involuntary PPMs until they can demonstrate readiness to implement the new Code.
Ofgem will be consulting on incorporating the Code into suppliers’ licences, which would make it legally enforceable.
All of the existing rules and provisions remain enforceable and Ofgem continues to check compliance against them.
The Code includes that suppliers and their contractors must:
- Make at least 10 attempts to contact a customer before a PPM is installed
- Carry out a site welfare visit before a PPM is installed
- Refrain from all involuntary installations for the highest risk customers including:
- Households which require a continuous supply for health reasons, including dependence on powered medical equipment
- People over 85 years of age (if there is no other support in the house)
- Households with residents with severe health issues including terminal illnesses or those with a medical dependency on a warm home (for example due to illness such as emphysema, chronic bronchitis, sickle cell disease)
- Where there is no one within the household that has the ability to top up the meter due to physical or mental incapacity
- Audio or body cameras worn by lead supplier representative present on all warrant installations or site welfare visits to check for vulnerabilities ahead of an involuntary installation or remote mode switch. All audio and footage will be available for audit
- Give a £30 credit per meter (or equivalent non-disconnection period) applied on all warrant installations and remote switches as a short-term credit/measure to remove the risk of customers going off supply
- Re-assess the case once a customer has repaid debts owed. Suppliers must contact the customer to offer assessment of whether a PPM remains the most suitable and preferred payment method of choice for consumers; if any PPM customer is clear of debt and wishes to move off PPM (understanding any changes in the tariff they will pay), the supplier must agree where the customer passes any required credit checks.
Jonathan Brearley, CEO of Ofgem, said:
“Ofgem’s new voluntary Code of Practice is a minimum standard that clearly sets out steps all suppliers must take before moving to a PPM. If and when involuntary PPMs are used, it must be as a last resort, and customers in vulnerable situations will be given the extra care and consideration they deserve, over and above the rules already in place, by suppliers – something that has clearly not always been happening.
“This new Code of Practice means, for some people, PPMs should never be installed, and, for high-risk groups, their energy needs must be protected with a higher level of consideration. The Code requires suppliers to become more attuned to the needs of all their customers in vulnerable situations, including if their circumstances change and reassessing if or when they do, and apply better compassion and professional expertise.
“We expect the overall number of involuntary PPM installations will fall over time, and we recognise that a careful balance is required to help manage debt, while protecting customers in vulnerable situations. So, this Code, whilst an important next step, is not the end of the journey.
We will be turning this Code into clear rules and regulations, and will be assessing its impact and taking further views from stakeholders as we do so. Equally, we continue to work with government and others to tackle wider affordability issues and move towards a sustainable, longer-term solution to ensure energy needs are affordable for all consumers, such as a social tariff and, eventually, cheaper, renewable, homegrown energy for all.”
Ofgem will now consult on whether to reflect provisions in the Code in legally enforceable licence conditions and guidance, ahead of the coming winter and on an enduring basis. This will build on existing rules, regulations and guidance which suppliers are required to follow.
Given the high levels of concern and the need to establish confidence in suppliers’ ability to implement the Code, suppliers should meet five conditions before restarting involuntary PPM activity.
- First, having signed up to the Code, suppliers should set out a change plan for how they will implement it, and commission and conclude an independent assessment to verify their readiness.
- Second, suppliers must conduct an independent audit to identify wrongfully installed involuntary PPMs and offer compensation and a return to a non-prepayment payment method to any affected customers.
- Third, supplier Boards should attest that the two conditions above are met: that the supplier is ready to restart involuntary PPMs compliant with the Code, and that redress will be offered to wrongfully installed PPMs.
- Fourth, the initial results of the PPM Market Compliance Review (MCR) should find no major concerns with the supplier’s historical compliance on PPMs. At this point, Ofgem will decide whether the regulator thinks it is right that the supplier can restart involuntary PPMs. If the initial MCR results do find major concerns, it is likely that a supplier will need to take corrective action before Ofgem would think it reasonable to restart.
- Fifth, suppliers will need to provide regular monitoring data to Ofgem, which will help the regulator spot concerning trends on involuntary PPM practices.
Yesterday’s publication also follows Ofgem launching the biggest review of suppliers’ compliance with their licence requirements; a detailed policy review to strengthen current rules, regulations and guidance; and comes as Ofgem also looks at levelising costs between PPMs and direct debit payments.
While Ofgem works to get tougher rules in place, the energy regulator is also addressing the cost-of-living crisis more widely - pushing for social tariffs and making sure energy bills are fair for everyone.
Notes to editors
- Ofgem has engaged with consumers to understand their opinions on involuntary PPM rule changes. The findings from this research have helped to inform the development of the Code of Practice, in particular which groups should be protected.
- The Code of Practice agreed with suppliers is a mechanism to withdraw from the suspension on involuntary PPM installations/remote switches.
- The aim of the Code of Practice is to set clear expectations on suppliers to further protect customers in vulnerable circumstances from being made to use, involuntarily, a PPM.
- NB: Involuntary PPM: Physical install of or remote mode switch to PPM from another payment method (DD/SC) without positive verbal or written customer consent
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