Energy companies are to be investigated by the regulator Ofgem after a sharp increase in the number of struggling households being forced on to prepayment meters.
Ofgem could consider taking legal action if it determines the rise in the number of homes being forced on to prepayment meters is proven to show companies are not taking proper due care of vulnerable households.
The move by the regulator, which is also calling for a “serious assessment” of a cheaper social tariff available for some low income households, comes after the business secretary, Grant Shapps, told suppliers to stop the practice or face being “named and shamed”.
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Shapps has written to energy suppliers telling them they are not doing enough to help vulnerable households and should be offering credit or debt advice, with prepay installations a last resort.
Earlier this month, the Guardian revealed that 3.2 million people – the equivalent of one person every 10 seconds – were left with cold and dark homes last year after running out of prepay credit, according to Citizens Advice data.
In a speech at the Institute for Government on Monday, Ofgem’s chief executive, Jonathan Brearley, said: “I am concerned about the sharp growth in households struggling to pay their bills being switched over to pre-payment meters, sometimes without their even knowing about it, leaving them without heating.
“I have heard directly from people who have faced poor practice from suppliers. It is simply not acceptable that vulnerable customers are left in the dark and cold in winter.”
Brearley said Ofgem was launching an industry-wide review into the prepayment switching process being implemented by energy suppliers.
Under existing rules, energy firms are not allowed to forcibly install prepayment meters or remotely switch a household’s smart meter to a prepay tariff without first exploring the financial help on offer or carrying out appropriate assessments, including identifying any vulnerability.
However, the regulator does not have the legal power to completely ban suppliers from shifting households to prepay meters.
“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,” Brearley said. “If we find that they have not taken due care in this process, we will take further legal action against them.”
Hundreds of thousands of households have been switched over to more costly prepayment meters in recent months, often unwillingly and without the offer of support, after failing to keep up with rising energy payments.
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The Labour leader, Sir Keir Starmer, accused the UK government of “looking the other way” when it came to vulnerable households being forced on to more expensive prepayment energy meters.
Speaking during a visit to Octopus Energy in Slough, he said: “This is shocking. The idea that people who are struggling with their bills are being forced on to prepayment meters, which are more expensive — you only need to say that to recognise it is wrong. The government is simply looking the other way on this.
“For a Labour government, we would have a moratorium straight away in relation to this. It’s simply not acceptable for these companies to operate in this way.
“It’s completely not acceptable for the prime minister to sort of say, ‘Nothing to see here, don’t want to know’. He’s got to act — show some leadership on this.”
Last week, Scottish Power, which has nearly 5 million customers, said it had stopped recovering outstanding debts from people who had been moved on to prepayment meters. British Gas said it would no longer switch smart meter customers remotely to a prepay tariff this winter unless they asked for it.
