Ofgem Proposes Measures to Protect Prepay Energy Customers

The energy regulator is consulting on strengthened support measures for prepayment energy customers, during the coronavirus crisis and beyond.

Ofgem is concerned by the number of prepayment energy customers, who are more likely to be vulnerable, temporarily going off supply because they can’t top up their meters, either due to inconvenience or lack of funds. 

Four million British households prepay for their energy, topping up gas and electricity meters with keys and cards loaded at corner shops and newsagents. But one in seven self-disconnected from their supply last year, going without heat and/or electricity. Other prepayment energy customers ration their energy use, minimising their use of lights and appliances and turning down their thermostats. 

Concerns have been raised that more households are going off supply during the coronavirus lockdown, as their finances take a hit and they self-isolate and avoid shops. There are also worries customers are being forced to go out to top up their meters while shielding or potentially infected with COVID-19.

Suppliers already agreed to support measures for PAYG energy customers during the pandemic. These include posting households pre-loaded keys, adding discretionary funds to meters and allowing customers to appoint third parties to top up their meters.

Now Ofgem wants to make these support measures more robust—and permanent.

Under the proposals, energy suppliers would be required to offer “breathing space” to customers, in the form of emergency and friendly hours credit. In these cases, customers are given a fixed amount of credit that allows them to stay on supply when they run out and during weekends and public holidays when shops are closed.

Suppliers should also offer additional credit to customers in vulnerable circumstances, including those who temporarily can’t afford to top up their meters and can’t get to local shops because they are self-isolating or have limited mobility.

Repayments of that debt should be calculated based on a customer’s ability to pay.

Many energy suppliers already offer some of this support, with many granting £5 of emergency and friendly hours credit. Ofgem is consulting on making these measures a formal licence requirement for suppliers.

Jonathan Brearley, chief executive of Ofgem, said: “These permanent protections will reduce the number of prepayment customers temporarily going without energy because they cannot afford to top up.

“It is always best for customers to keep up with their energy bills if they can. But at this time when many may face financial hardship, these proposals mean those who are struggling to keep up are assured of some breathing space.”

If approved following a consultation, the measures could be in place by the end of the year.

This isn’t Ofgem’s first intervention into the prepayment energy market. The regulator capped the amount PAYG energy customers could pay in April 2017, with the implementation of the Safeguard Tariff.

The cap was last adjusted in April, nudged downward to £1,164 for a dual-fuel household with typical use. However, that’s still higher than the maximum £1,127 credit energy customers on standard variable tariffs pay, under the energy price cap. 

It’s also about £200 higher than the cheapest prepayment tariffs on the market and more than £300 more expensive than the cheapest credit tariffs. Prepayment energy customers are estimated to pay, on average, £94 a year more for their energy than they would with a credit meter. 

Prepayment energy customers who are in good financial standing with their supplier and have decent credit scores can ask their supplier to replace their prepayment meter with a credit meter, usually at no cost.