PayPoint, the most commonly used top-up platform for pay-as-you-go energy tariffs, will overhaul its services and hand £12.5 million to energy charities, after an Ofgem investigation found its exclusivity contracts distorted competition in the sector.
PayPoint partners with energy suppliers to process transactions from prepayment customers topping up their credit. Customers can do this at one of 28,000 PayPoint retail outlets in the UK. These retailers are paid a commission for top-up payment transactions on PayPoint terminals and then PayPoint receives a transaction fee.
However, there have been concerns that PayPoint, nearly universally used by energy suppliers, abused its dominant position in the market by inserting exclusivity clauses into its contracts with suppliers and retailers.
Energy regulator Ofgem opened an investigation into PayPoint in August 2017, probing how these exclusivity clauses could have limited competition and choice in the market and harmed pre-payment energy customers, many of whom are vulnerable.
That investigation has now concluded with PayPoint agreeing to remove all exclusivity provisions surrounding energy pre-payment services from current and future contracts entered during the next five years with suppliers and retailers.
It will also offer separate contracts to energy suppliers that would allow retailers to use other payment providers and their equipment to process prepayment meter top-ups.
Finally, PayPoint will donate £12.5 million to Ofgem’s voluntary redress fund. The fund, administered by the Energy Saving Trust, supports charities assisting vulnerable energy customers.
Ofgem “believes that the commitments offered by PayPoint address its competition concerns and will ensure that competition is not distorted.” It will close this investigation without officially deciding whether competition rules were breached.
A spokesperson for PayPoint said: “Ofgem has now accepted our commitments as a resolution of its concerns. PayPoint will now implement the commitments with all relevant stakeholders in a timetable agreed with Ofgem.”
This is the second time in recent years over-the-counter pre-payment energy services have attracted Ofgem’s regulatory eye. Last year British Gas agreed to pay £1.73 million into the redress fund for a botched transfer from PayPoint to rival top-up platform Payzone in January 2020. British Gas failed to give adequate notice to 270,000 of its pre-payment customers that this switch was happening and left many struggling to top up their meters on a holiday when many retailers were shut.
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