Reading Time: 2 minutesFollowing a major review by Ofgem, several UK energy suppliers have committed to compensating customers and writing...
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Energy Suppliers to Pay Over £70m After Prepayment Meter Failings
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Kate McCann
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Reading Time: 2 minutes
Following a major review by Ofgem, several UK energy suppliers have committed to compensating customers and writing off debt linked to the improper use of prepayment meters (PPMs). The total financial redress now exceeds £70 million, following the discovery that thousands of vulnerable households were switched to prepayment arrangements without appropriate checks or consent.
This industry-wide response marks one of the most significant enforcement efforts in the sector in recent years, highlighting the importance of safeguarding customer welfare, especially during periods of financial strain.
Background: What Went Wrong?
Between January 2022 and early 2023, some of the UK’s major energy suppliers were found to have installed PPMs in homes without following proper procedures. In some instances, companies remotely switched smart meters to prepayment mode or sent agents to install meters without gaining proper consent.
These actions disproportionately affected vulnerable customers, many of whom faced financial hardship, health conditions, or other personal circumstances that made prepayment meters unsuitable. Some were left without access to energy when they were unable to afford top-ups – a situation that drew widespread criticism during the cost-of-living crisis.
Ofgem’s Review and Outcomes
Ofgem’s Market Compliance Review examined over 150,000 cases and found that many energy suppliers failed to take sufficient steps to assess whether customers were vulnerable before switching them to a prepayment model. In response, eight suppliers have agreed to pay a total of £18.6 million in compensation and debt relief to at least 40,000 affected households.
The level of compensation will depend on the seriousness of each case, with up to £1,000 being paid for instances involving forced meter installations, between £250 and £500 for significant failures in procedure, and approximately £40 for less severe issues. In addition, £13 million of the total is being used to cancel outstanding debts for customers who were wrongly placed on prepayment meters.
Strengthened Regulations For Energy Suppliers
In light of these findings, Ofgem has introduced new rules designed to prevent similar issues in the future. Energy suppliers must now:
- Attempt to contact a customer at least ten times before considering a switch to a PPM
- Conduct a mandatory welfare visit to assess the household’s circumstances.
Refrain from using forced installations in homes with:
- Residents over the age of 75
- Children under the age of two
- Individuals with severe health conditions
These measures are aimed at ensuring vulnerable households are not placed at risk and that suppliers are taking every step possible to explore alternatives before resorting to prepayment options.
What Affected Customers Should Do
Customers who believe they were switched to a prepayment meter unfairly are encouraged to contact their energy supplier directly. Ofgem has stated that compensation will be issued automatically to affected households; however, customers can also seek support elsewhere or escalate unresolved issues to the Energy Ombudsman.
Implications for the Energy Sector
This situation has sent a clear message across the industry: the treatment of customers, particularly those in vulnerable situations, must meet the highest standards. Regulatory oversight is tightening, and suppliers are expected to embed more robust checks and support measures into their processes.
For businesses operating in the energy sector, this development is a reminder of the growing importance of compliance, transparency, and proactive customer care. Failure to meet these expectations can result in serious reputational damage and financial penalties.
For businesses operating in the energy sector, this development is a reminder of the growing importance of compliance, transparency, and proactive customer care. Failure to meet these expectations can result in serious reputational damage and financial penalties.