Energy suppliers could risk losing their licence if they fail to follow new toughened prepayment meter rules, with Ofgem announcing plans to make its proposed industry reforms permanent.
As part of its clampdown on the energy sector, the market watchdog is launching a statutory consultation which will make its pledged reforms a compulsory part of suppliers’ licence conditions.
This includes all the rules energy firms signed up to in a voluntary code of practice earlier this year such as having to make at least 10 attempts to contact a customer before a prepayment meter is installed and exempting customers over the age of 85 without someone else in the home.
It is also now offering carrots to go with the stick of more stringent rules, with Ofgem unveiling plans for a small allowance in the prepayment price cap to allow suppliers to recover bad debts associated with additional support credit (ASC).
As it stands, suppliers are obliged to offer this to customers in need, with the regulator expecting high energy prices this winter to increase ASC payments for customers from suppliers.
Ofgem wants to set this allowance at around £13 per typical dual fuel prepayment meter fuel customer in total over 12 months
It does not expect this ASC bad debt allowance to lead to PPM customers paying more on their bills compared to direct debit customers in 2023/24 – because of the government’s commitment to remove the prepayment meter premium.
Toughened rules for energy firms follow British Gas being recorded using third-party operators to break into vulnerable households to forcibly install prepayment meters in an undercover investigation from The Times earlier this year.
Ofgem has since suspended forced installations through court warrants, as first reported by City A.M.
Neil Kenward, director for strategy for Ofgem said: “The voluntary code of practice for prepayment meters enhanced protections, setting clear rules for when a prepayment meter is or isn’t acceptable, as well as new requirements around the installation of prepayment meters.
“We are now seeking to make these voluntary arrangements binding, and we welcome all views on this statutory consultation.”