Prepayment Meters: Ofgem Decision

(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.

Can we be clear about the fact that, inexplicably, what has been happening has been completely legal? Nothing has changed since the gas and electricity Acts of the 1980s, and, indeed, the Rights of Entry (Gas and Electricity Boards) Act dates from 1954. Can the Minister explain whose decision it was that the courts should start issuing warrants for the forcible fitting of prepayment meters online, with no judicial oversight or scrutiny? Applications have been submitted in their thousands, and granted in their thousands, without even a magistrate looking at each case. Whose decision was that?

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.