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Prepayment Meters

Volume 726: debated on Monday 23 January 2023

(Urgent Question): To ask the Secretary of State for Business, Energy and Industrial Strategy if he will make a statement on families having prepayment meters forcibly installed in their homes by energy companies.

The Government recognise the importance of protecting customers, including those on a prepayment meter. That is why this weekend, the Secretary of State set out a five-point plan on prepayment meters. He wrote to energy suppliers to call on them to take every step to support consumers in difficulty. The Government want much greater effort from suppliers to help consumers in payment difficulty, including offers of additional credit, debt forgiveness and tools such as debt advice. Suppliers have been asked to commit to stop moving households to a prepayment meter wherever possible, and to reveal the number of warrants they have applied for in recent months, as part of a drive to increase transparency around prepayment meter installations.

There are reports that the courts are handling batches of applications for warrants, so the Department for Business, Energy and Industrial Strategy is working with Ofgem and the Ministry of Justice—I am pleased to have beside me the courts Minister, the Under-Secretary of State for Justice, my hon. Friend the Member for Finchley and Golders Green (Mike Freer)—to ensure that the process by which suppliers bring such cases to court is fair and transparent and supports vulnerable customers.

The Government have urged suppliers to take action to increase the number of vouchers being redeemed under the Government’s energy bills support scheme. We have published a list of supplier redemption rates, showing who is best meeting their responsibilities and those who need to do more.

The Secretary of State has written to Ofgem, asking it to do more to ensure that suppliers protect vulnerable consumers, including by revisiting its approach to the enforcement of supplier compliance and through the urgent publication of the outcomes of recent investigations into vulnerable customers. I will meet energy suppliers, Ofgem, Energy UK and Citizens Advice later this week to discuss these matters further. Those actions come on top of the Government’s unprecedented cost of living support, including the £400 discount under the energy bills support scheme and the energy price guarantee, which will save a typical household—on top of that £400—£900 this winter, with equivalent support in Northern Ireland.

Finally, we are considering a new approach to consumer protection. The Government will work with consumer groups and industry to consider the best approach, including options such as social tariffs, as part of wider retail market reforms.

I am glad that the Government have in the last few days finally woken up to the fact that we have a national scandal around prepayment meters. The question is whether their actions will stop the scandal; I fear the answer is no.

The Secretary of State could only say in his letter published yesterday that he

“would expect that the volume of…pre-payment meter installations and disconnecting households will start to subside over the coming months”.

The words “start to subside” are no comfort for the thousands more people who are facing bailiffs and being disconnected. Labour called for a ban on the forced installation of PPMs for at least the course of this winter to ensure that the Government, the companies and the regulator reform a broken system. Let us be clear that this is a broken system, with no proper criteria for what forced installation as a last resort means; no clear definition of the vulnerable; no proper clarity about the credit that should be offered to people on PPMs; no proper rules on debt repayment; and people on PPMs—the most vulnerable in our society—paying the most for their energy: a prepayment penalty.

Will the Minister answer three questions? First, would not the best thing he could do to prevent hardship this winter be to impose a temporary ban on the forced installation of prepayment meters? That is the way to protect thousands more who may fall into misery. Secondly, does he agree that, particularly in this cost of living crisis, it is quite wrong that those on prepayment meters are paying more for their energy, and will he take action to end that penalty? Thirdly, will he pledge to look at the system in other countries whereby nobody can forcibly be cut off—as we do with water in the UK—with a minimum amount of power supplied to all households?

Energy companies are forcing their way into people’s homes and millions are being disconnected by the back door. It is not enough for the Government to express regret, write letters and have meetings; only a ban will do.

We have today already seen a response from suppliers to the Government’s calls. We must look to be as effective as possible in effecting change now, and we believe that the Government’s calls on and engagement with suppliers, alongside that of Ofgem, is the right approach. Suppliers must exhaust—as they are required to do—all other alternatives before forcing the installation of a prepayment meter.

We, too, were once in opposition, so I understand the desire to come up with superficially popular policies, but we do not want to create a system where, in fact, more people are forced into debt, end up with bailiffs and are drawn into the court system. That is exactly what we wish to avoid. For many consumers, prepayment meters are a useful tool to allow them to manage their credit and ensure they do not get drawn into the court system in that way. [Interruption.]

If the right hon. Member for Ashton-under-Lyne (Angela Rayner) were to stop chuntering even for a moment, she would hear my response to the right hon. Member for Doncaster North (Edward Miliband), who asked me about the penalty, as he put it, of higher costs. The standing charge is a fixed charge that covers the cost of live supply, and it is controlled by Ofgem. The system, which I think was in place when the right hon. Gentleman was a Minister, is that the cost should reflect the actual cost of providing the service. Ofgem manages that, but I agree with him that this is something we should look at. That is why we are going to look at social tariffs and why we want to look at whether those costs should be socialised. This is a long-standing situation that we are seeking to address. The whole energy supply system is under stress right now because of the energy crisis, and it is right that we make moves sensibly, without perverse outcomes, to ensure that we protect the most vulnerable.

On the question of not forcibly cutting people off, I am always open to looking at these issues, but of course a lot of people will manage the way they use heat and electricity, and it is somewhat different from water. We want to ensure that we get the balance right by protecting the most vulnerable and making sure that we have a system that builds on the unprecedented protection for consumers that we brought in this winter.

Energy consumers on prepayment meters are among the most vulnerable energy consumers. In the face of the biggest ever hike in domestic energy prices, getting financial support to those people is more important than ever. While it is good news that 99% of energy bill support payment vouchers have been issued, it is alarming that only 71% have been redeemed. ScottishPower has redeemed only 64%. Other companies such as Bulb have redeemed 79%. Will the Minister put a rocket under companies such as ScottishPower to ensure that this money gets into the hands of vulnerable consumers as quickly as possible?

My hon. Friend is absolutely right, and that is one of the reasons we have published the list today. Transparency is the best form of disinfectant. We expect the suppliers’ chief executive officers to have conversations with their teams and to ask, “Why are we at the bottom of this list?”. We want competition between suppliers, but all of us have a role to play. It is up to the whole of society to ensure that people are aware of the vouchers. People in the greatest difficulty might be the least likely to open the envelope, for example, so we have looked at the design of the envelopes and at every front. We want to get the message out there to people on prepayment meters that the vouchers are there and that they are entitled to support. Like my hon. Friend, I would like to see the take-up increase.

Recently, the i newspaper reported that Wigan magistrates court had been granting around 2,000 disconnection warrants each month. On one day in December, 496 were granted in under four minutes without magistrates even knowing the names and addresses of those people, let alone their circumstances or vulnerabilities. Forcing customers into a situation where they pay the highest rates for energy and are at risk of self-disconnection without any discussion of their circumstances is patently wrong. Will the Minister ensure that this travesty of justice does not continue any longer, and implement a ban on the forced installation of prepayment meters?

I thank the hon. Lady for her question. Of course, before the suppliers get to that stage, they are required by Ofgem to ensure that it is absolutely the last resort. That is before they get to the court stage. As I said in my opening statement, we are working closely with the Ministry of Justice to ensure that the court process, as part of the overall system, is fit for purpose and provides the maximum protection possible.

Mortgage providers now do well in engaging with customers, managing difficulties and greatly reducing the number of repossessions. Does my right hon. Friend agree that energy companies should do likewise, rather than turning to prepayment meter warrants on the slightest pretext? If the numbers of warrants do not come down, does he agree that more should be done to have specific reduction targets?

My hon. Friend is absolutely right. We have to make sure that all suppliers are fulfilling the requirements set by Ofgem. Ofgem’s inquiry into the treatment of vulnerable customers by energy suppliers found weaknesses across the board, and it is engaging with suppliers on compliance. The Secretary of State wrote to Ofgem again in the last few days to reiterate the importance of ensuring that that compliance work has real teeth and that suppliers fulfil their obligations to protect these people.

Prepayment meters enforce a poverty premium on some of the most vulnerable in society. My Pre-Payment Meters (Temporary Prohibition) Bill would prevent their installation during one of the worst winters in living memory. In just over 30 days, the Government will allow my Bill to fall—but it is not too late. Will the Minister consider supporting it?

I thank the hon. Lady for her question. As I have said, we are looking at the treatment of vulnerable customers overall, including on the issue she raises through her Bill.

I am incredibly concerned to hear reports of a number of vulnerable customers being moved on to prepayment meters and to hear energy companies quoted in the media as saying that higher energy prices are here to stay, implying that the fall in wholesale prices will not be passed on to our constituents. I welcome the Government’s actions on both issues, but can my hon. Friend set out what steps are available to the Government if energy suppliers do not play fair, and reassure my constituents that he will take those steps if needed?

Suppliers are required to provide emergency and friendly hours credit to all prepayment meter customers, and where a supplier identifies that a customer in a vulnerable situation has self-disconnected or is self-disconnecting, it must offer them additional support credit where it is in the customer’s best interest to do so. Ofgem warned suppliers way back in June 2018 that PPMs should only be installed as a last resort for debt collection and banned forcible installations for vulnerable consumers in 2017. We are watching to ensure that we have the right steps in place and will take further steps if required to make sure that suppliers live up to their obligations.

What possible justification is there for forcing people to sit in the cold and the dark because they have been required to have a prepayment meter connected that they cannot afford to top up? Twenty-five years ago we had the same debate over water disconnections, and society decided it would no longer be lawful to deny any human being access to water. Have we not now got to the point where, similarly, our constituents should be entitled in all cases to light and to warmth?

Heat and light, not least as driven by the current energy prices, constitute a significant cost to families and to the nation. We have to work with the system to provide additional credit and support for people, but, having had 30 suppliers close business, with high costs imposed on the system and thus on consumers, we must get the balance right, so that we have a system that encourages people to pay their bills but also protects those who most need help.

I thank that the Minister for his statement. I have a number of constituents who use prepayment meters. Should energy companies not be using all their efforts this winter to focus on supporting those constituents with their energy costs, such as with the voucher scheme he has already mentioned, rather than trying to transition them forcibly on to prepayment meters?

My hon. Friend is right, as ever, and that is an important part of the message we are sending out today. I think this urgent question helps to strengthen that message to suppliers and others to ensure that people who are in a vulnerable position are supported to the greatest extent possible.

Seeing as the Minister is all about encouraging and asking companies to do things rather than enforcing any action, perhaps he might encourage or ask the energy companies to publish how much interest they earn from money that is loaded up-front on to prepayment meters, before it is expended on electricity and energy?

Too many people in my constituency are on prepayment meters. The forced installation of prepayment meters in places such as Peterborough, so that the most vulnerable have to pay more, needs to stop. What more can the Minister do to ensure that energy companies look at every possible avenue so that those in my city who are least able to pay are not paying the highest energy prices?

My hon. Friend is absolutely right. The system that we inherited and that exists today reflects the cost of supply, and Ofgem supervises that to ensure it is the case. Alongside him and others across the House, I would be interested in looking at that again to make sure we get a system with the right balance.

It is fundamentally unfair that people with a prepayment meter pay more for their energy. Whether they have chosen that prepayment meter or not, they have the same energy coming into their homes as everybody else. The argument from the energy companies that somehow, “This is justified because it is more expensive” falls completely flat when we find out that many people are being moved from smart meters straight over to prepayment meters. So will the Minister look at taking enforcement action to stop those on prepayment meters being charged more?

I thank the hon. Lady for her question. Switching any customer from smart credit to smart prepayment can take place only after an energy supplier has gone through a prescribed process, in the same way as if they were going to fit a prepayment meter to replace a traditional credit meter. The energy regulator, Ofgem, has rules in place that restrict the forced fitting of a prepayment meter or the switching of smart meters to prepayment mode for those in arrears except as a last resort.

I do feel that the Government need to offer a clearer explanation as to why those on prepayment meters have higher energy charges—that is the least we can do. What help and support is being given to those who were on prepayment meters but, finding themselves in better financial situations after the Christmas period, are now trying to transfer back across to credit meters? In some instances there are penalties for doing this. It should not be right that any energy company is imposing a penalty for those who wish to transition away from prepayment meters.

I agree with my hon. Friend and it is important to make sure that people do not find themselves caught in a cul-de-sac. He asked about the Government laying out the rationale for higher costs. I believe I have said this on two occasions, so I hope I have at least set out the rationale, whether or not people agree with it. The one that we inherited and that subsists today is that this is cost-reflective. Ofgem, the regulator, supervises this and ensures that no charges are imposed that do not reflect the additional costs of providing energy through that particular methodology. Whether we should change that is a separate matter, but I hope I have at least been clear in explaining the rationale that we inherited from the right hon. Member for Doncaster North (Edward Miliband) and others previously.

People living in north Wales are at the sharp end of the cost of living crisis. Last year, many of them paid the highest electricity prices in the UK, and the costs for those on prepayment meters was higher still. Recent figures from Citizens Advice show how precarious access to energy is for prepayment meter customers in Wales, with 32% being disconnected last year because they could not afford to top up. We have heard that the Minister will not ban the forced installation of prepayment meters, so will he give the Welsh Government the power to step in and put people before private energy profit?

I entirely reject the premise of the right hon. Lady’s question. We are not putting people behind the private energy company profits—quite the contrary; we are trying to ensure that we have a system that stops vulnerable people getting caught in debt, having bailiffs coming to the door and being further impoverished by a system that does not help them. That is what we are seeking to balance. As I have said, we are going to consider this in the round going forward, because the system and, most of all, people such as those she refers to are under a stress that has never been seen before.

The scrutiny and support that the Minister says the energy companies should be putting in place is not happening, so there is no point in hiding behind the words because 600,000 people were flipped over to prepayment meters last year. So why will he not—can he give a real reason for this—put in place a moratorium, until this mess is sorted out, on anyone moving over to prepayment meters? Will he also reverse things for those people who have been forced on to these high tariffs?

The speediest way this winter to make an alteration to this is to call on the companies to do everything possible to avoid doing it. Some have already managed to do it. That, of course, throws up the question of whether we should seek a long-term moratorium, and that is something to look at. However, right now, by publishing the data and urging the companies to cease using this except as an absolute last resort, which is supposed to be the requirement in any case, I hope to see those numbers collapse as soon as possible. This is the fastest way we can make a difference now.

The Minister needs to get a grip. A constituent has written to me saying that she has cut back to having one shower a week. Another says:

“I am mostly washing in cold water, but I’ve recently started getting the beginnings of painful arthritis in my fingers as a result.”

How low do people have to fall before the Government get a grip, take back control and get on top of this problem so that our constituents can have the basics of a good life?

Of course, the Government are providing an unprecedented three layers of support for consumers: the cost of living support for those on benefits, the £900 reduction in energy bills this winter and the additional £400 energy bills support scheme, as well as help for those on alternative fuels. The Government are bending over backwards, within an unprecedented and tight situation, precisely to help constituents such as those the hon. Lady mentioned, because we have to bear in mind the most vulnerable—those who are struggling, especially on a day like this when it is so horribly cold.

Legacy prepayment meters number about 300,000 in Scotland and 2 million in the UK. Many have a credit limit of only £99, which with the perverse higher tariff and standing charges does not go far, especially in cold times such as now. That requires multiple top-ups, and often people who are on legacy prepayment meters live in either rural areas or deprived urban areas devoid of public transport, or have restricted mobility. Will the Minister also undertake to address this other injustice, heaped upon those who are already the poorest and most vulnerable?

The hon. Gentleman is right to highlight people in rural areas, including the remote highlands and islands, which I am sure the right hon. Member for Orkney and Shetland (Mr Carmichael) will question me about if he gets the chance. The hon. Gentleman is absolutely right that we need a system that recognises the geographical and proximity challenges that affect people such as those he has mentioned, and—while under unprecedented stress, as I say—works at that granular level for ordinary families, often in remote areas. They need help and we need a system that supports them.

Figures from Citizens Advice show that in Wales 81,441 people are being disconnected at least once a month, and 24,432 people are being disconnected at least once a week. In October, Ofgem warned suppliers that not enough was being done to identify customers in vulnerable circumstances before installing a prepayment meter, but analysis of calls to Citizens Advice’s consumer service just in the past month suggests that that practice is ongoing. Voluntary action is not working, so I repeat: will the Government implement a total ban on forced prepayment meter installations until new protections are brought in?

We have called on suppliers to voluntarily stop the practice of switching to prepayment meters as the answer to households struggling to pay their bills, and they should also make a greater effort to help the vulnerable. We are going to look at this whole system, not least following Ofgem’s investigation that found failings by energy suppliers when dealing with the most vulnerable.

We must thank Dean Kirby from the i newspaper for his campaign—he called me because of my 2016 campaign on prepayment meters, and I also informed him of my experience as a magistrate. I am disappointed that it has taken so long to ensure that people on prepayment meters do not pay the extra tariff. An elderly constituent of mine who had had a stroke had no gas in their home. The unintended consequence of smart meters is that they can be switched remotely, and the Minister cannot rely on energy suppliers to do the right thing. Can he please take emergency action, and will he please realise that winter deaths have increased by 20% this winter?

One of the issues raised by the right hon. Member for Doncaster North (Edward Miliband) was the fact that redemption of the energy support vouchers that provide help for people on prepayment meters is at about 71%, as opposed to the higher level that we would like. That is something we need to address, because in this freezing weather it is more important than ever that those with prepayment meters look out for and redeem their vouchers, as a contribution to helping them get through this challenging time.

With respect, the Minister’s response to this urgent question has been utterly pathetic. The truth is that the voluntary approach the Government have taken is not working, as has been said by Members on the Government Benches as well as on ours, so the question for the Minister is this: will he take action to prevent people from freezing to death this winter, or will he continue to have reviews when the emergency is now? Will he please show the urgency and the scale of response that is needed, and tell us that he will take the approach laid out by my right hon. Friend the Member for Doncaster North (Edward Miliband)?

As I have said to the House, we are urging suppliers to desist from using prepayment meters and to do everything possible to make sure that they are avoided, but we recognise that, as a final and last resort, having exhausted everything else, they can be a way of helping people to control what might otherwise be an unmanageable debt.

The entire debate around fuel costs when prices were spiking was about the impact on vulnerable people and people who would have to make the choice between heating and eating, and sometimes not being able to make a choice about either. Why, then, did it take Citizens Advice to expose this scandal and the fact that the Government have been asleep at the wheel? The only way to sort this out, when forced entry warrants have been issued on an industrial scale by magistrates courts, is to impose a moratorium, so that we make sure that no one who has a prepayment imposed on them is forced into a situation where they cannot afford to pay fuel costs. That is surely the minimum that the Government should do.

As I have made clear to the House, the Government are absolutely calling for suppliers to do everything possible to avoid doing this, and I think that we are already seeing movement as a result of that call.

You will be aware, Madam Deputy Speaker, that prepayment customers, many of whom are the least well off in society, are charged a higher rate for their energy. Does the Minister recognise the huge injustice being forced on thousands more households as they are shifted on to prepayment meters and higher rates? What will he do to correct that injustice urgently, including, hopefully, issuing a moratorium?

I have explained that the system that Ofgem enforces, and has long enforced, is strictly based on the cost of delivery. We will look at that again to make sure of that. We have to ensure that the existing conditions on compliance on which Ofgem works with suppliers are right, but we also need a future system that learns from current pressures.

In Orkney and Shetland, we have the highest rates of fuel poverty anywhere in the country. The premium paid by the poorest people in my constituency takes the advance situation and risks making it catastrophic. We have another problem on top of that, as we cannot get any energy company to install meters in new-build houses in the northern isles. When the Minister next speaks to the energy companies, and when he has stopped them installing meters that people do not want in the rest of the country, can he ask them to send some engineers to the northern isles to install the meters that new house owners need?

The right hon. Gentleman has raised this with me. There are issues, and the Government have intervened to make sure that the distribution costs in the far north of Scotland and the islands are not fully reflected in the price, so a special exemption has been made. However, he is right—I have heard about the difficulty for builders of getting a meter installed, and it should not be beyond the wit of man for people to align and work together to make sure that the system runs efficiently and people get a meter when they should. I share his frustration.

I thank the Minister for answering the urgent question. Before I take points of order, we will move to a personal statement by Andrew Bridgen.