Prepayment Meters

Tuesday 24th January 2023 Lords Chamber

Commons Urgent Question

The following Answer to an Urgent Question was given in the House of Commons on Monday 23 January.

“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 honourable 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.”

15:19

[Baroness Blake of Leeds (Lab)]

My Lords, Citizens Advice has reported shocking stories of families having their homes forcibly entered and left disrupted after forced installation of prepayment meters, at a time when they are already anxious about the cost of energy and making ends meet, with no certainty of the situation improving. The Government are right to conduct a review, but how does the Minister justify allowing this practice to continue in the meantime?

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

Well, I say to the noble Baroness that the Government recognise the importance of protecting customers, including those on a prepayment meter. This weekend, the Secretary of State set out a five-point plan on prepayment meters. He wrote to energy suppliers, calling on them to take every possible step to support consumers in difficulty. The Government want to see much greater effort from suppliers to help consumers who have payment problems, including offers of additional credit, debt forgiveness or tools such as debt advice. It is worth bearing in mind that the licence conditions set out that forcible prepayment installation should happen only as the absolute last possible resort.

[Lord Teverson (LD)]

My Lords, there is an irony here when it comes to prepayments, in that those who are worst off have to pay more because prepayment customers pay heavier tariffs than those on direct debit or other means of payment. Surely, this is a fundamental unfairness and one that creates even greater fuel poverty. Should there not be regulations to equalise the costs to consumers?

[Lord Callanan (Con)]

I say to the noble Lord that prepayment customers do not pay higher tariffs than other customers. They pay slightly more because of the cost of servicing prepayment meters. It is an important distinction. If we were to equalise the cost, that would mean that other customers would pay more to service that, and many other customers in fuel poverty are on credit meters—so I am afraid that there is no easy answer to this problem.

[Baroness Altmann (Con)]

My Lords, will my noble friend take back to his department the need not only to look at the forcible installation of prepayment meters but the installation of smart meters? An elderly gentleman I know, living alone, had a smart meter installed. He did not wish that, but it was forced on him. It was installed somewhere he could not see it. He had to climb on to a stepladder to operate it. Inadvertently, he had not paid his bill and he was cut off and left without heating, lighting, computing or a telephone for days and ended up calling an ambulance because his smart meter had let him down. Can my noble friend assure us that any investigation for vulnerable customers will include smart meter installation as well?

[Lord Callanan (Con)]

I say to my noble friend that I would like to hear more about that case, because I can see a number of potential problems with what she had to say. First, nobody is forced to accept a smart meter. I am the Minister responsible for smart meters and I know that it is the policy that is maintained. Secondly, if you have a smart meter, you do not need to look at the smart meter—that is the whole principle of it. You have a separate display unit, which will provide you with the information that you need. So I would be interested to hear more about that particular case if my noble friend would let me know.

[Baroness Uddin (Non-Afl)]

My Lords, the Minister said that he was not aware of anyone who had been forced to have a smart meter, but, as far as I know, all new social housing tenants are being forced, whatever the methods are, to have smart meters. A number of families in the east London area have contacted me since these issues have been made public. They are saying that they are aware that the cost is considerably more than for their neighbours, who do not have them. Will the Minister ensure, whatever the review is, that the public are made aware that this is a more costly option and that they have the right to the option that is the most affordable for those who cannot afford these very expensive smart meters?

[Lord Callanan (Con)]

I am sorry, but the noble Baroness is absolutely wrong. First, nobody is forced to have a smart meter. Secondly, if you have a smart meter, you pay the same tariff. There is no difference in cost just because of the particular meter you have. Smart meters are, in my view, a great innovation and provide a lot of comfort and ease for consumers—but there is no difference in the tariffs between normal meters and smart meters.

[Baroness McIntosh of Pickering (Con)]

My Lords, is my noble friend aware that prepayment meters lose the option of the direct debit reduction, so those customers are actually paying a premium rate? Also, in Committee on the Energy Bill, I mooted the idea of a social tariff for the most vulnerable customers, which the Government are now looking at. Will my noble friend bring forward amendments on Report in that regard?

[Lord Callanan (Con)]

As I said, people pay slightly more for prepayment meters because of the cost to suppliers of servicing those customers. The issue of social tariffs is of course different. I have had this debate with my noble friend before. We had a system of social tariffs that was replaced by the warm home discount, which was found to be a better way of supporting vulnerable customers. But, of course, we will continue to look at the issues.

[Baroness Fox of Buckley (Non-Afl)]

My Lords, I feel as though I have to state the blindingly obvious, which is that being asked to pay more for servicing a prepayment meter that you do not want is not fair. To anyone in the normal world, saying that the tariff is the same just makes the Minister sound like someone who does not understand the normal world. Ordinary people are paying more for a prepayment meter that they do not want but which is being imposed on them, and they are the people who have the least money. It is ludicrous.

[Lord Callanan (Con)]

The noble Baroness says I do not understand, but I have lived in properties with prepayment meters and I very much understand the issues. No one is forced to have a smart meter or a pre- payment meter, either, except in the limited circumstances that I have outlined, particularly for customers who are in levels of debt, and we have put in place a number of measures to try to reduce that as much as possible. I have outlined the steps that we are taking with suppliers to make sure that those are imposed on customers only in the last possible circumstances.

[Lord Harris of Haringey (Lab)]

My Lords, the argument that the Minister has trotted out, that it costs more to sustain customers who are on prepayment meters and that is why they pay more, is of course based on the days—I remember writing about this 40 years ago—when people used to put coins in the machine and then somebody had to come and empty the box. That necessarily cost the suppliers more. Nowadays, however, people have to go and have their key recharged and pay in advance, so the companies are getting the money earlier than they do for everyone else on a credit meter. So why are these customers paying more?

[Lord Callanan (Con)]

I am well aware of how the system works. The fact remains that to put in place commissions to shops and others that sell the credit to service prepayment customers over those who pay via direct debit costs suppliers more. Under the licence conditions that have existed for many years, suppliers are permitted to recover what it costs to operate those particular customers.

[Lord Cormack (Con)]

My Lords, anybody who has been a constituency Member of Parliament knows that forcible entry into a home is a terrifying experience. The noble Baroness, Lady Blake, asked an extremely simple question: could this not be suspended until inquiries are complete? Why can the Minister not give an affirmative answer to that question?

[Lord Callanan (Con)]

Because none of these matters is simple. We have called on the suppliers to impose a voluntary moratorium, and we are working with them to try to implement that, but, of course, if we do that there are other options for suppliers, involving bailiffs and various other methods of collecting debt that are also not to be recommended. These are difficult issues that we have to deal with. To get a warrant requires a process through a magistrates’ court and, if a person wishes to object, they can go along and get their case heard by a magistrate.

[Baroness Butler-Sloss (CB)]

My Lords, if the suppliers will not help, what are the Government going to do to help the people who cannot afford this?

[Lord Callanan (Con)]

The Government have put in place a considerable package of support, involving tens of billions of pounds of price support, which applies to prepayment customers as well as to others. Nobody denies that this is a difficult time, with energy prices being so expensive, but the noble and learned Baroness is well aware of the package of support that we have offered.

[Baroness Lister of Burtersett (Lab)]

My Lords, the i newspaper has shown that thousands of cases are being put through magistrates’ courts without any proper assessment of the case at all, with no one having the opportunity to put their case. The Minister is doing a lot of urging of energy companies to do the right thing, but, if the imposition of prepayment meters on vulnerable households continues, at what point would the Government be willing to take effective action? How many people have to go cold before that point comes?

[Lord Callanan (Con)]

Warrants are put through in bulk only when they are not contested. People are informed of applications to courts and, if they wish to contest the application, they are entitled to a separate hearing and their arguments will be heard by the magistrate. That is how justice works in the UK.