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Prepayment Energy Meters

Volume 827: debated on Wednesday 8 February 2023


Asked by

To ask His Majesty’s Government what plans they have (1) to introduce legislation to prohibit the forcible installation of prepayment energy meters, and (2) to compensate those subjected to this practice.

It is right that Ofgem has asked suppliers to pause the installation of prepayment meters under warrant until they have assured Ofgem that they are compliant with all relevant regulations. Courts have been instructed not to list warrant applications, and the Secretary of State has asked energy bosses to report back on how they will identify consumers who may have had a prepayment meter installed inappropriately and how they will put those matters right.

My Lords, I am not really satisfied with the Minister’s explanation. All the parties that he mentioned are partly responsible for the current state of affairs. Since 2019, nearly 1 million warrants for the forced fitting of prepayment meters have been nodded through the courts. The victims have been denied fair and public hearings, as required by Article 6 of the European Convention on Human Rights. Will the Minister now commit to a judicial inquiry into the failure of the whole apparatus and immediate compensation for those who have suffered?

Ofgem is in fact conducting an inquiry into the matter. We were all appalled to see the activities of British Gas in particular, which were exposed by the Times newspaper, to which we should be grateful. However, we should remember that prepayment meters are a useful tool for some customers to help prevent debt building up. A complete ban on prepayment meters would likely just see a move to debt enforcement by the courts and bailiffs, which is not a desirable outcome either. So none of these policy choices is easy, but the Secretary of State has written to all energy suppliers asking them to report back to him urgently on what steps they are taking to put these matters right.

My Lords, is not the problem that people with prepayment meters are in the main people who are financially stretched, but they pay a higher rate for their electricity? What is the regulator doing allowing this to continue?

My Lords, my noble friend knows that normally I agree with him, but in this case he is partly wrong. Yes, there is a slight extra charge for those on prepayment meters, but actually the highest rates are paid by those who have traditional standard credit. The cheapest way of paying is by direct debit. It is also not true that all customers on prepayment meters are necessarily in financially straitened circumstances. Some people—students, young people, people in tenanted accommodation and so on—prefer that method of payment. If we socialise the costs and equalise them among everyone, then many poorer people who prefer either standard credit or direct debit would pay more to take account of that.

My Lords, on Sunday, as the Minister said, the BEIS Secretary gave energy bosses until yesterday to report back on what remedial measures would be taken where prepayment meters were installed in the homes of vulnerable customers. He also said in his Statement on Monday that any compensation scheme is a matter for the regulator, Ofgem, which raises the question: what exactly are the Government going to do with what the energy suppliers report back to them?

I am told that those letters came in last night, and the Secretary of State and officials are reviewing those responses. We will have more to say on this shortly.

The Minister must be alive to the prospect that what is happening here is that the courts system is simply so overrun that the warrant operation system is not functioning properly. Are the Government prepared to invest what is needed in the courts system to overhaul that, if it is indeed found to be one of the causes of these terrible incidents?

The noble Lord makes an important point. The Lord Justice in charge of it has instructed the courts not to issue any further warrants in the meantime while these matters are investigated, but I am sure that is an important thing that we need to look at.

My Lords, what is the cost of the 1 million warrants issued by the courts since 2019 for the forced fitting of prepayment meters? How much of that money has been recovered from energy companies?

I am afraid I did not quite understand the noble Baroness’s question, as it depends on what she means by the cost. Is it the cost to suppliers or customers, or the costs through the courts system? I will ask officials to look at it and perhaps write to her on that.

My Lords, those consumers who are not on direct debit get their £67 a month back through vouchers. We know that some 18% of those are not claimed, so who keeps the money? Is it the energy retailer or the taxpayer?

Ultimately, it will be the taxpayer because that is a taxpayer subsidy, but we want to ensure that everybody gets the money that they are entitled to. The performance of companies varies widely in delivering these vouchers. Clearly, if people are on a smart meter then it is more advantageous because the support can be delivered easily and directly. We are working with suppliers to ensure that people get the support that they are entitled to but, by the very nature of premises with prepayment meters in them, it is sometimes difficult to get hold of the person paying the actual bill.

My Lords, I accept the basis of what my noble friend is arguing, but might he see whether we could look again at the real costs of prepayment meters? It seems that the energy companies get the money in from them to start with and that normally, if you pay in advance, you pay less. It seems odd if it is still true that some of the poorest are paying more. Can we look at that and see whether the figuring is in fact accurate?

Of course, we continue to look at this and I know that Ofgem is taking a close interest in it at the moment. All that is allowed under the licensing conditions is that suppliers can cover their actual costs that are reflective of servicing those different customers. As I said, the most expensive method for suppliers is those who pay by standard credit, because they have to send out a bill then receive the payment in, et cetera, so those people pay even more than those on prepayment meters do.

My Lords, Lord Justice Edis stopped all of the warrant process on the basis that the courts had not been considering the vulnerability of the customers against whom warrants were being issued. The reason that process exists is to prevent prepayment meters being forced upon people who are vulnerable and would maybe therefore not get heat. There is a degree of urgency, therefore, in sorting out who has prepayment meters and is not getting access to energy. From the Minister’s answers, I did not detect when Ofgem is going to report back to him and what steps he understands either it or he are taking to try to protect those people who did not get the protection of the courts.

The noble and learned Lord is right. The purpose of the Secretary of State writing to suppliers was to find out what arrangements would be made to put right matters that went wrong. Clearly, a number of consumers who are vulnerable have had the meters fitted, which of course is against Ofgem rules and against the licence conditions of those suppliers. That is why the courts are right to stop the issue of these warrants until these matters have been sorted, but we want Ofgem to report back as quickly as possible.

My Lords, is there not another aspect of this agenda as well? Ever since the start of the Covid crisis, HMG have been doing all they can to persuade people to use non-cash payments for items such as utility bills. Surely it makes no sense whatever to now force some of the poorest members of the community in this country to use cash against their will.

Of course, you do not have to use cash with a prepayment meter. You can have a smart prepayment meter, which you can top up using mobile phones and so on, but overall my noble friend’s point is valid.

My Lords, the issue of a warrant to forcibly enter a dwelling-house is a very serious matter. In this case, we have heard that it has been done in mass numbers, which I suggest is clearly unacceptable. Would it not be in the interests of justice for the householder to be given the opportunity to make representations during the hearing as to the right or wrong of that procedure being taken?

I am not an expert on the system, but my understanding is that they are able to do exactly that now. The suppliers have to write to people to say that they are applying for a warrant and anybody has the right to go along and make representations in response to that. It is only when the applications are unchallenged that they are issued en masse.

My Lords, there is a degree of urgency to lowering the price of gas so that the poorest people in greatest difficulty, with or without meters, can pay. It just so happens that the price of gas is lower now than before the lockdown two years ago or the Ukraine invasion. Why is that much lower price not being passed on now to the poorest so that they can pay, rather than having their doors knocked in and being forced to take meters?

It will be passed on when the price cap is reviewed by Ofgem. It is worth stating the amount of government support being given to all consumers. The reality is that over the winter the Government—the taxpayer—have been paying approximately one-third overall of people’s energy bills. There is a considerable amount of government support because of the massive increase in prices due to Putin’s war. Thankfully, the world has responded, and prices are coming down. However, many suppliers hedged against that and bought long-term contracts. As that unwinds into the energy system, prices will come down and the price cap will reflect that. Later in the year, we should hopefully see a reduction in the price cap. At the same time, of course, government support will begin to be unwound, so we will have to see how those two factors interact.