We welcome Ofgem’s proposals to incorporate key elements of the Involuntary PPM Code of Practice into Supply Licence Conditions and detailed elements of the Code into the Safe and Reasonably Practicable guidance on involuntary Prepayment Meter (PPM) installation. These steps demonstrate Ofgem’s recognition of the severe affordability challenges faced by consumers and the fact that existing safeguards have failed to protect vulnerable households from inappropriate PPM installation and harmful debt enforcement.
The proportion of StepChange clients in energy arrears has continued to rise as high energy prices persist. 35% of StepChange clients had energy arrears in the first half of 2023, up from 19% in 2019. The average amount of energy arrears is now £1,679, up from £1,056 before the pandemic. Clients with a PPM make up a quarter (24%) of StepChange clients and their circumstances are uniquely challenging.
Despite high instances of additional vulnerability and deficit budgets among this group, these clients are more likely to have faced intrusive enforcement and payment demands that lead them to ration their energy use and self-disconnect. We welcomed the new involuntary PPM Code of Practice and the steps set out in the Code to better protect those struggling with energy affordability and additional vulnerabilities against inappropriate forced PPM installation/switching and improve standards of responsible debt collection in the energy market. We also strongly welcome Ofgem’s steps to meet its commitment to move the Code into licence conditions.
This noted, we have concerns about elements of the proposals that risk weakening the impact of the Code and continuing to expose consumers in financial difficulty and/or vulnerable situations to poor outcomes:
- Paragraph 3.14 of the proposed licence conditions (the Precautionary Principle) gives suppliers discretion to install a PPM in cases where they have been unable to confirm the risks this would entail for a consumer. The proposed wording gives too broad discretion for suppliers to set aside key protections and is too vague as to how suppliers should reach judgements in the absence of conclusive information. Financial difficulty creates consumer vulnerability and engagement challenges that mean the operation of protections in situations in which engagement is difficult is crucial. The rules should be clear that the onus is on suppliers to show that a PPM can be installed safely and, where this has not been possible, forced installation should not proceed. Failing that, Ofgem should amend the proposed wording to strengthen expectations of suppliers in this situation and clarify monitoring and follow-up expectations.
- We also have concerns that there is insufficient prescription about how suppliers should asses ability to pay, determine proportionality of enforcement and the checks required for consumers who fall outside the new Further Assessment Needed (FAN) category.
- Given the vulnerability of the groups included in the FAN category and of customers experiencing payment difficulty in general, and difficulty to date achieving high standards of consumer protection in the energy market, we advise that groups in the FAN category should be moved into the ‘do not install’ group while the FAN requirements should be applied to all consumers (with strengthened wording). Summary
- Ofgem’s acknowledgement that debt enforcement may pose greater risks for vulnerable groups than mandatory PPM installation demonstrates the need for Ofgem to strengthen its requirements of suppliers pursuing enforcement of energy debts. We would like to see similar protections in place to the proposed PPM rules and guidance for the use of High Court Enforcement Officers, with specific customer groups exempted from this form of enforcement.
- While new protections are welcome, evidence from StepChange’s advice service alongside the wider evidence base shows that supplier compliance and performance is patchy. A more effective approach to monitoring and enforcing compliance with conditions and guidance is essential to ensure higher standards are effective.
- More generally, rising energy debt levels and the desire of all stakeholders for improved safeguards for consumers highlight the urgent need for a long-term solution to address affordability challenges and support customers struggling with energy arrears. StepChange has supported calls for a government backed ‘Help to Repay’ payment matching scheme to clear bad debt arising from the present period of exceptional energy costs. As Ofgem and the government take forward discussions and consultation about the future of the domestic energy market, a key consideration must be establishing mechanisms to support good outcomes for customers in vulnerable situations with energy arrears.