PARLIAMENTARY DEBATE
Prepayment Meters: Ofgem Decision - 6 February 2023 (Commons/Commons Chamber)

(Urgent Question): To ask the Secretary of State for Business, Energy and Industrial Strategy if he will make a statement on Ofgem’s decision to suspend the forced installation of prepayment meters.

As I have set out to the House previously, it is critical that our most vulnerable energy users are protected, which is why we have already put in place a generous package of support to help people with their energy bills this winter. I was appalled, however, to see reports that vulnerable customers struggling with their energy bills have had their homes invaded and prepayment meters installed when there is a clear duty on suppliers to provide them with support. Since those reports came to light, we have acted swiftly and we will not hesitate to go further to protect consumers.

The Secretary of State has called for more robust Ofgem enforcement on those issues, as well as, more importantly, action from suppliers. It is right that Ofgem has now taken the steps it has, including asking suppliers to pause forcible installation and to conduct a thorough review of processes, and I welcome steps from those suppliers who have already announced that they will do so. I welcome the move by Lord Justice Edis today, ordering magistrates courts in England and Wales to stop authorising warrants for energy firms to forcibly install prepayment meters with immediate effect.

The Government expect strong and immediate action where suppliers fall short of their obligations. I discussed these matters with the chief executive officer of Ofgem this morning, and I met the CEO of British Gas on 1 February to tell him of the strength of the Government’s concerns at the distress that his company has caused to customers. The Secretary of State has asked suppliers to set out by the end of the day tomorrow how they will make redress to customers who have inappropriately had a prepayment meter fitted, including the possibility of compensation, and I look forward to seeing the responses from suppliers.

I thank the right hon. Member for Doncaster North (Edward Miliband) for raising this issue. I remind the House that I have committed to meeting the all-party parliamentary group on prepayment meters, where I can keep Members updated on the issue as we move forward after today.

I thank the Minister for his reply, but it is simply not good enough. The story of this scandal is of a Government sitting on their hands and being far too slow to act. Ofgem did reviews in September and November and highlighted the problem—where were the Government? In early January, Citizens Advice reported that 3 million people have been disconnected by the back door. Even after that, he came to the House and refused an outright ban. Now we know the result of his inaction: 30,000 people have had warrants issued for the forced installation of prepayment meters in the past month alone, and 6,000 in the past week since he said no to a ban—thousands of people who are victims of Government negligence.

Let me ask the Minister some questions. First, how long will this pause, which has finally been put in place, last? Will he pledge that it will not be lifted until this discredited, rotten system is properly reformed? Secondly, he mentioned compensation as a result of remedial action for those adversely affected. Will he tell us how this compensation scheme will work? Thirdly, will he look at the case for energy companies having to supply a minimum amount of power to all customers, as in France, so that nobody is cut off—just like we do not cut off people’s water supply in this country? Fourthly, this crisis is happening against a backdrop of energy bills being due to rise 40% in just eight weeks’ time because the Government say there is nothing more they can do. This is the next looming scandal. Will he finally end the loopholes in the windfall tax, including billions being siphoned to fossil fuel companies, to stop bills rising?

Energy companies forcing their way into people’s homes, millions getting disconnected by the back door, no proper windfall tax on fossil fuel profits—this is Britain under the Tories. There is no one else to blame; it is long past time they got a grip.

The right hon. Gentleman asks how long the pause will last. That is up to Ofgem, as the regulator. It looked at this process before, as he rightly said, and it had assurances that have not proven to be accurate. Ofgem needs to ensure that the processes are properly observed, because it should be an absolute last resort that a prepayment meter is forcibly installed. He asks how compensation will be worked out. That is a matter for Ofgem. As is proper for the regulator, it stands between the Government, consumers and the suppliers in delivering that.

I have asked officials to look at providing a minimum amount of power, like France does. There are a lot of technical and other challenges to such a system. One of the benefits of having a prepayment meter is that it allows someone who is not engaging with their supplier and is running up debt to none the less have a supply continuing in their home. Having people cut off completely if they fail to manage that is not something we would want to see.

The right hon. Gentleman talked about the position from April. I am proud that the energy price guarantee will continue after April, providing support for households right the way into 2024, and we have committed to consult on a new system to look after vulnerable consumers after that date.

The right hon. Gentleman mentioned the windfall tax and loopholes. We are investing in our energy security. While we are importers of oil and gas, as we will be under net zero all the way to 2050, the absurd position set out by the Leader of the Opposition is that Labour will oppose any new oil and gas licences, meaning that we pay billions to other countries to import it. There is no magic bullet to stop us using fossil fuels immediately. This Government have accelerated the move to renewables as fast as possible and will continue to do so, but it is absurd to have a policy under which we pay billions to countries abroad to produce oil and gas that we could produce at home to ever higher carbon standards.

An Englishman’s home is his castle, so it is disgusting that British Gas is forcing its way into people’s homes. What is especially galling is that, five years ago, Ofcom sent a missive to British Gas warning it not to do this, and British Gas is clearly ignoring Ofcom—[Hon. Members: “ Ofgem.”] Ofgem. What further powers can the Government give the regulator to ensure that British Gas and other such companies cannot do this again and to protect the sanctity of people’s homes?

My hon. Friend is absolutely right. We should all be grateful to The Times and its journalists for going undercover and revealing such behaviour—the processes were not followed. Ultimately, as a final resort, we need a forcible installation of prepayment meters in order to ensure that someone is not cut off entirely; that is necessary, but every effort must be made to support people, offer them payment plans, provide them with emergency credit and the like. We are ensuring that we have a system that does that. Ofgem has therefore since announced that it will conduct a further assessment of supplier prepayment meter practices, and we will back Ofgem to have all the powers it needs to hold suppliers to account.

I call the SNP spokesperson.

It should never have got this far. We should never have ended up in a situation in which we are now talking about compensating people for something that should never have been allowed to happen to them in the first place. Nor would it have happened if the Government had listened to the many voices who have been telling them this for months. Since I first wrote to the Secretary of State in September—I am still waiting for a reply, incidentally—prepayment meters have been mentioned 450 times in this place and the other place, so the Secretary of State feigning surprise at the weekend is just not acceptable. Nor is stopping at this one aspect of forced switching, and nor is compensation alone—these meters need to be taken away.

Why are we so appalled? It is because prepayment meters are unfair, full stop. Whether they are forced on vulnerable people or whether people choose to have them, they are unfair because someone who is on one will pay more per unit of energy than those who pay in arrears, which is most of us; they will pay more in daily standing charges; and they will be automatically disconnected the second they run out of money. That is why these abhorrent practices, which have been going on for a very long time, are so unfair: prepayment meter customers are treated unfairly, full stop. Will the Minister ask the Secretary of State to look at all aspects of prepayment meters with a view to radically overhauling the entire unfair system? Does he believe that energy should be a human right?

The hon. Lady says that prepayment meters are unfair, full stop. That is clearly not true: they have a great use. What they should do—

They are more expensive!

Where the charges are higher, it is because the system, which I think was last changed when the right hon. Member for Doncaster North (Edward Miliband) was Secretary of State, has meant that Ofgem is under an obligation to ensure that suppliers match charges to the actual cost of serving a customer. That was the principle established under the last Labour Government, and it subsists today, but I tend to agree with the hon. Member for Glasgow North East (Anne McLaughlin) that we need to look at this again. That is why we are looking at a reformed system for the treatment of vulnerable customers from April 2024.

It is welcome news that forced prepayment meters have finally been stopped, but that is only half the story. The premium paid by those who are on prepayment meters is also a scandal. The least able to pay are paying the highest tariff because they cannot afford the cheapest tariff—you couldn’t make it up. Will the Minister update the House on what Ofgem is doing to radically and quickly look at the matter so that this injustice is finally put to bed?

As I said, the system for a long time has been that charges should be cost-reflective, and it is more expensive to service prepayment meters. We need to look hard to ensure that the increase in prices, which has come as energy prices have gone up, is commensurate with that before we look at the position of PPMs overall, which we will do as part of our overall reform of the treatment of vulnerable people. It is worth pointing out that the last time a survey was done, only 30% of those who are in fuel poverty had a prepayment meter, while 70% did not. Ensuring that we have a system that is fair to all is really important; that is why it is quite a complex job to make sure that we have a better system than the one we inherited from the Labour party.

I am very disappointed in the Minister’s reply to the question that my right hon. Friend the Member for Doncaster North (Edward Miliband) asked about a minimum level of supply. It is utter nonsense to hide behind the idea that it is complicated. I am sure that energy companies could find a way of doing it. When will the Minister make them?

It is worth pointing out that emergency credit should be supplied to customers and support should be put in place for those who get into arrears. It is a failure of the existing processes and duties that has been highlighted and has caused us to come before the House today. We must make sure that companies do that which they are obliged to do.

Of course I welcome the move by Lord Justice Edis to order magistrates courts to stop the authorisation of warrants for energy firms, and I will write to my hon. Friend if I can identify the root cause of the original decision.

On 7 December, I presented a private Member’s Bill to ban the installation of prepayment meters this winter, but the Government chose to ignore me, and since then nearly 60,000 people have been put through the misery of prepayment meter warrants being issued against them. Will the Government now apologise to all the households who had prepayment meters wrongfully installed, will he force the energy companies to remove the prepayment meters, and will he personally commit himself to ensuring that the companies pay back the poverty premium that so many vulnerable people have been forced to pay this winter?

I entirely agree with the hon. Lady. That is exactly the sort of development we want to emerge from what has happened. We want to ensure that prepayment meters are removed when they should not have been installed, that people’s rights are respected, and that if the processes that should have been followed have not been followed, compensation is provided as well.

It is clear from the evidence received by the Justice Committee only last week and, now, from the statement made by the senior presiding judge, Lord Justice Edis, that—leaving aside the merits or otherwise of prepayment meters—the agreement by the judiciary to deal with warrants in bulk resulted from their reliance on assurances given by the energy providers that they had complied with Ofgem’s requirements and that the representatives of the energy providers, giving evidence in relation to each bulk application, would swear on oath that the requirements had been met. It is clear that in many cases they cannot have been met. That must surely indicate, first, that the process itself is flawed and should not be continued and, secondly, that there must be an inquiry into not just the process itself, but the suitability of some of those who are representing the energy suppliers and Ofgem in court. Either they gave misleading information by inadvertence or, potentially, they did so deliberately, which, on oath, amounts to perjury. That is a very serious matter which brings the court process into disrepute, and it needs to be investigated too.

I thank my learned hon. Friend for his typically erudite question, and I agree with him. That is why, two weeks ago, we said that we would work with the Ministry of Justice to look into this and ensure that the processes were suitably robust. It is clear—not only, potentially, from court proceedings but from evidence given to the regulator—that some suppliers did not provide evidence on which we could rely.

The Minister will know that prepayment customers, many of whom are the least well off in society, are charged a higher rate for their energy; that has been mentioned by Members on both sides of the House. Does he recognise the injustice of thousands more families being forced on to prepayment meters, on his watch, and on to higher rates at a time when so many are facing severe cost of living pressures? Does he not accept that it is time for him to step up and act further and faster, because this country needs that?

As I have said, that situation has obtained since the Labour Government introduced the current regime, and it is that cost-reflective principle which leads to prepayment meter customers being charged more. That was the position when the right hon. Member for Doncaster North was Secretary of State, and it still exists today. However, I agree with the hon. Lady, which is why, within the existing system, I have asked Ofgem to seek to ensure that not a penny extra goes beyond what is necessary to reflect cost. We are undertaking to look again at the whole system to ensure that it is fair to all, and most of all to the most vulnerable.

There are concerns that some of the poor practices around prepayment meters may have been going on for some time. How far back will the investigation look into these matters? Will it look at some of the historical issues, particularly abuse of those vulnerable people?

My hon. Friend is absolutely right. The Government will support the regulator to look into this matter thoroughly because any injustice done to any consumer must be identified and redressed.

My constituent Mr Valmassoi has to move out of his home at the end of the month because Utilita has taken so long to investigate a potential fault with his prepayment meter that saw his bills soar by over 400% in 14 days, despite no increase in usage. What can the Minister do? Mr Valmassoi says that a refund nine months later will not replace losing the flat that he has made his home for the past few years. What can he and others like him, who have been ignored and let down by providers such as Utilita, expect from the Minister?

It is precisely for people who have been ill-treated such as the hon. Lady’s constituent that we need to reform the system and ensure that suppliers meet their licence obligations. It is the job of the independent regulator to work with suppliers and ensure that we minimise that. We would encourage anyone to pursue the system of redress to make up for that as best they can. But no one can make up for the fact that someone lost their flat and home. They should not have done so if the supplier had acted as it was under a duty to.

Figures from the Ministry of Justice show that, between July 2021 and December 2022, magistrates granted 536,139 warrants and refused 75—0.014%. It is inconceivable that none of those people and families had vulnerabilities. I welcome the fact that the Minister has said that the meters will have to be removed and that compensation should be paid, but many of these poor and vulnerable people are suffering now because they do not have heat and electricity. What will he do to ensure that those people get immediate redress?

That is exactly the purpose of the further work undertaken by the regulator: to ensure that we have a system that is fair to all and that, if there has been a failure of due process by suppliers, it is rectified.

On “Sophy Ridge on Sunday”, the Secretary of State said that Ofgem had had

“the wool pulled over their eyes”

and had been taking companies “at face value”. Who was pulling the wool, and what penalty should they face? Is the regulator that allows the wool to be pulled over its eyes and takes companies at face value—and the Secretary of State who failed to deal with that in time—fit for purpose?

The hon. Gentleman asks a good question. I would not want to encourage focus on anything other than the failure of suppliers to fulfil their obligations. He is right that we also need to ensure that we have a regulatory regime and a system that does its job. As ever, we will keep that under review.

It is interesting that the Minister is now blaming suppliers; he was blaming Ofgem at the beginning. In the Business, Energy and Industrial Strategy Committee last week, we had the retailers’ body Energy UK blaming Ofgem for not enforcing on its members strictly enough. We cannot keep going around this, with Ofgem blaming people who could pay their bills for not paying their bills. The reality is that this is brutal. The Minister may not have noticed, but he is actually in Government. He has to get a grip of this to ensure that people are not in their homes freezing to death. The cost to our NHS will be off the scale. When is he going to take up his responsibilities, stop blaming other people, put an end to this nightmare and make sure that people are not having forced installations?

Of course, the Government have stepped up. That is precisely what we have done with the energy price guarantee, providing £900 of support this winter, plus the energy bill support scheme with an additional £400, plus support through the benefit system for those on benefits. The Government have stepped up to help people and we need others to make sure that they step up and meet their obligations. That includes the energy suppliers.

I hope I can be coherent, because I am so angry. People with disabilities and their families face a monthly cost in excess of £600 a month for a single person and over £1,000 for a family with a disabled member in it. Right throughout this cost of living and energy crisis, they have suffered more than double the amount that normal households have. The Minister says he wants to focus on suppliers who are not doing things correctly, but I want you to focus on people who are—

Order.

I beg your pardon, Madam Deputy Speaker; I did say that I would try to be coherent.

I want the Minister and the Department to focus on those who are affected by this abhorrent practice and to stop it—not pause it, but stop it immediately. When will he do that?

I thank the hon. Lady for her question. As I have said, the legal decision today that no more warrants will be implemented is, I think, the right one and should give her some confidence that between the regulator, the suppliers, the justice system and others, we will ensure that we have a system that is fit for purpose and has the interests of people including the disabled people she has highlighted as its top priority.

According to information from the Ministry of Justice, on 1 February The Times published a story revealing that British Gas routinely sends debt collectors to break into customers’ homes and forcibly fit pay-as- you-go meters, even when those customers are known to have extreme vulnerabilities. Is this not just another example of the Government’s failure to regulate our broken energy market?

I would say no, because there are clear duties on the suppliers, in this case British Gas, which is why I spoke to its chief executive last week to tell him how disgusted the Government and indeed the whole House were with that behaviour, that it was unacceptable, that the proper processes had to be followed and that we had to ensure that people were treated fairly.

I am not sure that the Minister answered the question from my hon. Friend the Member for Glasgow North East (Anne McLaughlin) on this, so I will try again. Does he think that access to energy and electricity should be a fundamental human right?

As the hon. Gentleman will know, my job as the Energy Minister is to ensure that we have a strong, robust energy system that is fair to everyone and most of all to the most vulnerable, and that is what I will focus on. I will leave it to others to decide what is or is not a human right.

The Government’s job is to govern, but for months and months the Minister has been sitting on the sidelines watching this car crash happen, and it is the people of our country who are paying for that. Why does he not bring forward legislation right now to ensure that people on prepayment meters do not pay a different tariff from everyone else and that the other corrections can be put in place?

As I have said, the situation was created under the last Labour Government in which suppliers have been obliged to charge rates that reflect the actual costs to them of delivering a service to someone. That, at face value, is the correct system. We need to look at whether we need to change that system to be fair to vulnerable consumers, remembering that most vulnerable consumers are not on a prepayment meter. We have to have a system that is fair for all.

Almost one in five households in Scotland are off the gas grid. Fuel poverty and the use of prepayment meters are greatest in those areas because those households are reliant on unregulated fuels and on electric heating systems, which have always been more expensive. Will the Minister recognise that additional burden, regulate those additional fuels and provide sufficient support in those areas for insulation and alternative heating systems, as well as financial support? The crisis there is even greater due to the double whammy of people being off the grid and in fuel poverty.

I thank the hon. Gentleman for his question, and he is quite right to speak up for people in rural areas who find themselves in exactly the position he describes. I am pleased to say that as of today, credits to electricity bills will be being paid to of people who are on the electricity grid but off the gas grid—they will be appearing from now on. We are determined to help those people, which is why we announced in the autumn statement a doubling of the alternative fuel payment from £100 to £200. That money will be going to help those people, and the portal will also open before the end of the month for those who are not on either the gas grid or the electricity grid, so that they too can apply and get that £200 support.

It should not take a journalist going undercover for the Minister to finally decide to wake up. I have been campaigning on prepayment meters since 2015, and the Government are still relying on energy companies to do the right thing. They are not going to do the right thing, so the Government need to force them. We have seen how quickly the Government can put legislation through.

Can I ask the Minister to confirm three things? First, in addition to providing compensation, will he remove prepayment meters from vulnerable households? Secondly, will he make prepayment meters cheaper per unit of energy? That is when the energy companies will start changing how they act. Thirdly, the cost has been significantly reduced due to smart meters, so the energy companies cannot use that as an excuse, but the scandal of smart meters is that energy companies can switch people remotely. Will the Government ensure that that can no longer happen and is outlawed?

I thank the hon. Lady for her question, and I am happy to confirm the compensation. If prepayment meters were made cheaper, we would have everybody seeking a prepayment meter and there would be nobody left to subsidise the vulnerable, and most of the poorest people do not have a prepayment meter. That question is entirely aligned with typical economic policy from the Labour party, but I do not think it contributes usefully to the debate.

However, the hon. Lady is right to highlight the importance of smart meters, and we want to see an acceleration of that programme. Smart meters provide a much better service and are cheaper to run, and I hope that as part of our plans for April 2024 onwards, when the Government support ends, we will have a system that encourages the installation of more smart meters and is much fairer to vulnerable users.

Analysis by Citizens Advice Cymru indicates that around a third of prepayment users in Wales have been disconnected at some stage during the past year. Furthermore, there has been a threefold increase in the number of consumers being switched to prepayment meters. Do those stats alone not indicate that there is a real issue with the way in which energy companies use prepayment meters?

I thank the hon. Gentleman for his question. The cost of energy has gone up, and despite extraordinary interventions by the Government, families are none the less finding it harder as a function of the Ukraine war and of global energy prices. That is why this Government have gone so fast in moving ourselves to cheaper renewable energy and away from the—what was it?—just 7% of energy that came from renewables when the right hon. Member for Doncaster North left office. Now that figure is well over 40%. We are going to move to a cleaner, greener and cheaper system that will be better for consumers in Wales.

My constituent had fallen into arrears with ScottishPower, but he was complying with his repayment plan when ScottishPower demanded the full settlement of his debt in December. When he could not do that, he was forced on to a prepayment meter, which of course compounded the problem.

I have two questions. First, the Minister has mentioned that only 30% of the most vulnerable are on prepayment meters. I would like to know when that data is from, because it would be useful to have a more up-to-date figure than that; I struggle to believe that is still the case. Secondly, if energy companies are forcing the installation of these prepayment meters, can the Minister give the House an assurance that it will not be the vulnerable customers who end up footing the bill—that those costs will be absorbed by the massive profits that the energy companies will make—and that prepayment rates will be on par with other energy rates?

I will write to the hon. Lady with the exact date—I believe it may have been 2020 or so—when 30% of those deemed in fuel poverty were on prepayment meters and 70% were not. It is highly unlikely that that would have materially changed in the period since so that the ratios are reversed. I can give her the assurance that there is no way that people who have been subject to the wrongful installation of prepayment meters will be picking up the tab. However, a complexity worth highlighting in the House is that although energy generators may be making record profits, energy suppliers have not been making profits in recent years, and we need a system that is fair to consumers and ensures stability in the energy supply market.

We have heard that the people who are struggling most to pay their energy bills are often the most vulnerable in our society, and they are being forced on to a higher tariff. We have also heard that the appeals system is cumbersome and people may even lose their house. The Minister has blamed the utilities companies and Ofgem, neither of which have covered themselves in glory. He has even blamed the previous Labour Government, of 13 years ago. Does he not think that perhaps now is the time that this Government should take their responsibility?

Under this Government, not only are we seeing the transformation of our system to being greener, but we have seen the contracts for difference, which are of course reducing the costs to consumers, as those generators pay hundreds of millions of pounds into the pot to help lower bills for everybody. This Government have taken forward the greening of our energy system and at the same time we are working towards a sustainable future that will be fair to everyone, most of all the most vulnerable.

I thank the Minister for his answers. Does he not agree that this treatment of customers—of the disabled, pregnant women and single parents with young children, some of whom were in hospital when they were moved to prepayment meters—if not already illegal, should be? What further steps will he take to prevent the big companies from being able to trample all over the little man and the little woman, not simply in this one aspect, but in the overall treatment of the ill and the vulnerable?

The hon. Gentleman may always come at the end of the questions, but his are rarely the weakest ones. He is absolutely right on this. If we need to do more to strengthen the regulator, we will do so, to make sure that, as he says, the people who feel themselves to be at the bottom of the pile are not ill-treated—we cannot have a system that does that. We have to have one that puts their interests at the top of our list of priorities.

I thank the Minister for answering the urgent question.

Business of the House (Today)

Ordered,

That, at this day’s sitting—

(1) Notwithstanding the provisions of Standing Order No. 16 (Proceedings under an Act or on European Union documents), the Speaker shall put the Questions necessary to dispose of proceedings on—

(a) the motions in the name of Guy Opperman relating to (a) Social Security Benefits Up-rating Order 2023 and (b) Benefit Cap (Annual Limit) (Amendment) Regulations 2023, and in the name of Laura Trott relating to (c) Guaranteed Minimum Pensions Increase Order 2023 not later than three hours after the commencement of proceedings on the motion for this Order; and

(b) the motion in the name of the Chancellor of the Exchequer relating to the Charter for Budget Responsibility not later than 90 minutes after the commencement of proceedings on the motion for that Order;

proceedings may continue, though opposed, until any hour, may be entered upon after the moment of interruption; and Standing Order No. 41A (Deferred divisions) shall not apply; and

(2) Standing Order No. 41A (Deferred divisions) shall not apply to the Motion in the name of Secretary Grant Shapps relating to Energy.—(Penny Mordaunt.)