Suppliers commit to a further £18.6million customer compensation and debt write off following Ofgem’s prepayment meter review

Energy suppliers that fell short of required standards when trying to recover debt by installing involuntary prepayment meters will pay £18.6million in compensation and debt write off to at least 40,000 customers, following the completion of one of the most wide-reaching reviews carried out by the energy regulator. 

Ofgem's Market Compliance Review (MCR) required suppliers to examine their practices around more than 150,000 cases of involuntary prepayment meter installation, including both meters that were installed under warrant and smart meters that were remotely switched to prepayment mode. The regulator also thoroughly examined the warrant process and customer journey when an involuntary PPM is installed, and worked with consumer groups and charities to analyse evidence of the most serious breaches. 

This update marks the closure of the MCR for the eight suppliers involved, while enforcement investigations British Gas, Utilita and OVO are continuing.  

The review identified limited cases where a prepayment meter was fitted under warrant when it wasn't safe or reasonably practicable to do so. It is estimated that this occurred in fewer than 1% of cases.  

However, a number of customers were affected where their supplier's processes fell short including through poor data quality and inadequate record keeping, which in some cases meant customers didn't get the support they needed when they were in debt.  

As a result of Ofgem's review, suppliers have committed to apply compensation guidelines developed by Ofgem for these customers to pay both additional compensation where it's due, and in some cases write off some energy debt of customers who had an involuntary PPM installed during the assessment period set out as part of the regulator's review (1 January 2022 and 31 January 2023).  

Suppliers will pay £5.6million in compensation – using the guidelines set out by Ofgem – to 40,000 customer that had an involuntary PPM installed during the assessment period. Suppliers will also write off a further £13million of debt from customers who had an involuntary PPM during the assessment period.   

This is on top of £55million of financial support provided directly to affected consumers by suppliers prior to the completion of the review in the form of hardship payments and debt write off. Customers identified as having had a PPM wrongly installed or where processes were not followed adequately between 1 January 2022 and 31 January 2023 will be contacted by their suppliers, and do not need to take action. OVO has also confirmed it will pay compensation to customers in line with the guidelines developed by Ofgem. 

Tim Jarvis, Director General, Markets, said:  

“This has been one of the most detailed reviews of supplier practices in Ofgem's history looking at tens of thousands of cases. It has taken time, but our priority has been to put things right for those who weren't treated properly, and ensure we don't see bad practice repeated. 

“While the number of cases where a prepayment meter was wrongfully installed is relatively low compared to the total number of PPM customers, one case is one too many. 

“Our review also found wider issues with the processes suppliers had in place, which is why we've put in place clearer, tougher rules to protect customers in vulnerable situations, and I'm pleased that from today suppliers will be applying our compensation framework for those customers affected and have also committed to further support such as debt write off.  

“We have made our expectations clear to suppliers on how those customers who were treated poorly should be compensated. They have, and continue to, work closely and collaboratively with us to make sure their processes are robust and that their customers are properly supported. 

“We know that PPMs can be an effective tool in helping customers manage their costs and debt. However, customers must always be treated fairly and compassionately, and we are confident that the changes we have made are a significant step to ensure that happens.” 

Evidence of poor practice in involuntary PPM installations came to light in early 2023. At that time, Ofgem identified a number of concerns around how energy suppliers handled involuntary PPM installations.  

At the same time, Ofgem strengthened the rules around PPM installations and increased clarity on the steps a supplier must take before considering installation, including cases where a PPM should not be installed without the customer's consent, and cases where suppliers need to take extra steps. For all installations, suppliers must now make at least 10 attempts to contact a customer and carry out a welfare visit before a PPM is installed.  

The compensation guidelines developed by the regulator take into account the issues identified in the market compliance review, and reflect the potential impact the behaviour may have had on customers.  

Last year Ofgem set out a strict set of conditions suppliers must meet before they are able to restart involuntary PPM installations, after the temporary ban on installations came to an end. Suppliers were also required to complete independent audits to identify wrongfully installed PPMs and commit to reinstating non-prepayment methods and offer compensation where applicable.  

Suppliers must also provide regular monitoring data to Ofgem to ensure continued compliance with the new rules and Ofgem is carrying out checks across all suppliers that have met restart conditions.   

The PPM MCR is part of a series of measures from Ofgem to drive up the standards of service in the energy sector, and support for households struggling with the cost of energy. As part of this work, the regulator is currently consulting on plans to tackle the growing impacts of rising debt in the energy system, and create lasting change in the way debt is managed and customers in debt are supported. The plans could see a fund called the Debt Relief Support Scheme established, which suppliers would use to either write off debt or help pay off debt by ‘debt matching' customer payments.   

It also set out ambitions to improve the standard of service from suppliers when supporting customers that are struggling to pay their bills. The proposals would make it easier for consumers to get help from charities and debt support agencies and ensure a consistent approach is taken across the board. 

The regulator expects to provide further details of the Market Compliance Review outcomes this summer. 

ENDS 

Notes to editors 

• Customers and consumer groups can check energy suppliers that can install prepayment meters without household permission on the Ofgem website.   
• The full list of rules suppliers must follow when installing an involuntary PPM can be found here: New prepayment meter rules extend protections for vulnerable people | Ofgem  

Customer compensation 

• Customers that are due compensation, including those that have received some compensation, but are due more, will be contacted by their supplier. Compensation will be paid directly to customer accounts, and some customers will also have a portion of their debt written off. 

Enforcement investigations  

• Ofgem's investigations into Utilita and British Gas remain ongoing.  
• Ofgem has also confirmed it is extending its ongoing investigation into OVO to include the following Standard Licence Conditions (SLCs): 26.1 (Priority Services Register), 28.2, 28.4 (safety and reasonable practicability of Prepayment Meters, and guidance). 

These SLCs relate to obligations to customers on the Priority Services Register and ensuring customers' Prepayment Meters are safe and reasonably practicable in all circumstances.