Households could soon be made to pay £30 on top of their energy bills to subsidise customers who are not paying their bills.
Energy regulator Ofgem is considering allowing suppliers to make an additional charge to bill payers to help make up the shortfall caused by other households who are missing payments in the cost of living crisis.
Ofgem could introduce the charge on energy bills as early as October, to reimburse companies for rising levels of customer debt that it estimates could total hundreds of millions of pounds following curbs on prepayment meter installations, according to The Times
Read more: Warning that energy crisis is far from over as 'prepay debt reaches £1bn'
Its new code of practice around force fitting prepayment meters to recover energy debt came about after a national outcry over the tactics of companies using debt collectors to force vulnerable people to have the meters installed. Chancellor Jeremy Hunt has also announced that energy firms will be stopped from charging higher rates if they pay for their energy using pay-as-you-go meters.
However, the four million families who have prepayment meters will join customers who pay by cash or cheque on receipt of their energy bills or pay by direct debit if the plans are approved, although a spokesperson stressed that the plans were only at the initial stages and needed consultation before they were implemented.
According to Ofgem estimates, six per cent of typical dual fuel standard credit bills will go to pay debt-related costs between April 1 and June 30, compared to 1% of typical dual fuel direct debit bills and 0.4% of typical dual fuel prepayment meter bills. This difference partly results from paying bills in arrears (sometimes quarterly) means customers can build up significantly greater levels of debt, particularly around winter, than direct debit customers. Those who use pre-payment meters have to pay upfront before using energy, so usually can not build up arrears unless they use emergency credit.
Under the new rules, energy companies can no longer forcibly fit prepayment meters in the homes of people aged over 85, or those who require a continuous supply of electricity for medical equipment, and body cameras must be worn by staff from suppliers on prepayment meter visits. All suppliers have also signed up to a new Ofgem code on prepayment meter installations, which is currently voluntary but the regulator is consulting on making it part of licence conditions.
Ofgem’s energy price cap – which limits the amount a provider can charge per unit of gas and electricity on a standard variable tariff – fell to £3,280 this month, although households are currently paying around £2,500 on average, due to the Government's Energy Price Guarantee. The price cap includes an allowance for bad debt – money owed by customers which is unlikely to ever be recovered.
It is not clear how customers will be charged the additional levy, which Ofgem said was an initial estimate which will be assessed further.
An Ofgem spokesperson said: "About four million people in Britain use pre-payment meters, through which they pay upfront before using energy, rather than being billed in arrears from their direct debit account. We’re tightening up the rules on when and where pre-payment meters can be installed, which combined with the current pause on installations may result in higher debt levels in energy suppliers.
“These improved protections are needed, but we need to balance these with the potential impact on levels of bad debt. We’re seeking evidence on this now and will update in the coming months on any changes to the price cap that might be needed.”
A spokesperson for Citizens Advice Newcastle said that the organisation cautiously welcomed new rules for suppliers for force fitting prepayment meters, but that targeted financial support in the form of a social tariff is the long-term solution needed to help millions of people struggling with record high energy bills.
"The energy situation is a long-term problem and needs a long-term solution," she said. "Citizens Advice believes targeted financial support in the form of a social tariff is the long-term solution needed to help millions of people struggling with record high energy bills. We are calling on the government to put in place long-term policies to support people."
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