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How do prepayment meters work and what are the rules around them? | UK News

Energy regulator Ofgem has launched an urgent investigation into “extremely serious allegations” of British Gas contractors forcing pay-as-you-go meters on vulnerable customers.

A Times investigation has alleged Arvato Financial Solutions – a company used by British Gas to pursue debts – forced their way into people’s homes despite clear signs they were disabled or vulnerable.

The paper also claimed Arvato incentivised installing prepayment meters with bonuses – despite the firm saying it “acts compliantly at all times in accordance with the regulatory requirements”.

The boss of British Gas’s owner, Centrica, has since apologised, adding that an internal investigation is now under way.

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Boss of British Gas owner ‘truly sorry’

According to guidance, prepayment meters should be a last resort for people unable to pay their bills – as they pose a higher risk of being left without electricity – and should not be imposed on the vulnerable in any circumstances.

But courts are currently being overwhelmed with warrant requests from suppliers – despite rules in place to prevent forced switches.

How do prepayment meters work?

Prepayment meters are pay-as-you go gas and electricity meters. They can be topped up online or with a card at certain shops and post offices.

About four million UK households have them.

They are mostly used by people who are struggling financially – as they allow you to pay for small amounts at a time.

But this means that when the money runs out, your electricity and heating switch off. Three million people ran out of credit on their prepaid meter last year, according to Citizens Advice.

When someone is unable to pay their energy bills and has fallen behind on them significantly, energy providers seek to switch them on to a prepaid meter – so they stop getting access to energy they haven’t paid for.

According to Ofgem, this is being done by several firms without customers’ knowledge.

What are the risks?

The households on prepayment meters in the UK largely fall into these groups:

• People living in social housing

• People who have moved into a property where the previous tenants had issues with their bills

• People who have had issues with credit or their bills themselves

“People on prepayment meters are usually people who are financially vulnerable,” Erik Porter, head of financial wellbeing at Wagestream, tells Sky News.

Prepayment meters are charged at different rates to pay-monthly tariffs – and traditionally have been far more expensive.

This is still the case in some circumstances, but the energy crisis has changed things.

“With the increase in energy prices and the government’s energy price guarantee, we’re all largely paying the same, very high price for energy,” Mr Porter says.

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He adds: “If your meter runs out at 3am and you don’t live in a city where shops stay open all night, you’re going to struggle to top up. At the moment you’re also going to be doing that in -5C.

“You’re also expecting people to have cash in their pockets when they need it.

“If you need to top up on Monday but don’t get paid until Tuesday, you’re going to have to use credit or an overdraft, which with high interest rates will keep you trapped in that downward spiral.”

Citizens’ Advice, End Fuel Poverty and the Labour Party are calling for a total ban on force-fitting prepayment meters when bills aren’t paid to put barriers between people and disconnection.

But this would mean more bailiffs getting involved in cases – instead of resolving debt by prepaid meter or a payment plan – which the government wants to avoid.

Close Up Of Female Hand On Central Heating Thermostat

What are the rules around them?

If someone hasn’t paid their energy bills, their supplier has several ways to get them to repay the debt.

One of these is by installing a prepayment meter.

According to Ofgem, getting a court warrant to force-fit a prepayment meter should be a “last resort” after “all reasonable steps have been taken to agree payment”.

The provider can also only do so if it is “safe, practical and easy to use and get to”.

On vulnerable customers, Ofgem says: “Suppliers can’t force-fit a prepayment meter under warrant for people in very vulnerable situations if they don’t want one or charge them for warrant costs on debts.

“Nor can they use warrants on people who would find the experience very traumatic.”

There is also a government ‘Breathing Space’ scheme, which gives people 60 days’ reprieve from creditors to allow time to seek advice and find a viable solution to their debt.

And generally you can’t be disconnected over winter (1 October to 31 March) if you are of pension age, disabled or chronically ill.

Providers have vulnerability pledges to help safeguard their vulnerable customers, but these are not legally binding, however.

What is Ofgem and the government saying?

Following reports of Arvato forcing their way into the homes of vulnerable customers – including ones with severe mental health problems and young children with disabilities – Ofgem has launched an “urgent” investigation into British Gas.

“These are extremely serious allegations from The Times. We won’t hesitate to take firm enforcement action,” a spokesperson said.

“It is unacceptable for any supplier to impose forced installations on vulnerable customers struggling to pay their bills before all other options have been exhausted and without carrying out thorough checks to ensure it is safe and practicable to do so.”

The regulator is also carrying out a major market-wide review into the “rapid growth” in prepayment meter installations and potential breaches of the rules around them.

Business and Energy Secretary Grant Shapps had previously written to energy suppliers with a cease-and-desist order on all force-fits of prepayment meters.

He also demanded data on the number of warrants requested to “name and shame” the worst offenders.

“Suppliers are clearly jumping the gun and moving at-risk customers on to prepayment meters before offering them the support they are entitled to – I simply cannot believe that every possible alternative has been exhausted in all these cases,” he said.

“Rather than immediately reaching for a new way to extract money out of customers, I want suppliers to stop this practice and lend a more sympathetic ear, offering the kind of forbearance and support that a vulnerable customer struggling to pay should be able to expect.”

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Jonathan Brearley, the chief executive of Ofgem, added that after reviews of practices in 2022, “we will take forward further a more detailed assessment to check whether plans have led to improvements.

“This review will focus specifically on self-disconnections, remote switching and forced installations, and the checks and balances companies have around any decision to put a customer on a prepayment meter.

“If we find that they have not taken due care in this process, we will take further legal action against them.”

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