Energy companies are to be investigated by the regulator Ofgem after the number of households struggling with their bills being forced on to prepayment meters has increased sharply.

Ofgem could consider taking legal action if it determines that the rise in the number of homes being forced on to prepayment meters is proven to show companies are not taking proper due care of vulnerable households.

The move by Ofgem, which is also considering cheaper social tariffs available for some low income households according to the BBC, comes after the business secretary, Grant Shapps, told suppliers to stop the practice or face being “named and shamed”.

Shapps has written to energy suppliers telling them they are not doing enough to help vulnerable households and should be offering credit or debt advice, with prepay installations a last resort.

Earlier this month, the Guardian revealed that 3.2 million people – the equivalent of one person every 10 seconds – were left with cold and dark homes last year after running out of prepay credit, according to Citizens Advice data.

Jonathan Brearley, the chief executive of Ofgem, will deliver a speech on Monday voicing his concern about the rise in households being switched to prepayment meters “sometimes without their even knowing about it”, the BBC reported.

“The numbers of forced installation of prepayment meters is extremely high,” he will say in a speech at the Institute for Government. “It is simply not acceptable that vulnerable customers are left in the dark and cold in winter.”

Brearley will say Ofgem is to launch an industry-wide review into the pre-payment switching process being implemented by energy suppliers.

“[The review will focus] specifically on self-disconnections, remote switching and forced installations and, the checks and balances companies have around any decision to put a customer on a prepayment meter,” he will say. “If we find that they have not taken due care in this process, we will take further legal action against them.”

Under existing rules, energy firms are not allowed to forcibly install prepayment meters or remotely switch a household’s smart meter to a prepay tariff without first exploring the financial help on offer or carrying out appropriate assessments, including identifying any vulnerability.

However, the regulator does not have the legal power to completely ban suppliers from shifting households to prepay meters.

Hundreds of thousands of households have been switched over to more costly prepayment meters in recent months, often unwillingly and without the offer of support, after failing to keep up with rising energy payments.

Last week, ScottishPower, which has nearly 5 million customers, said it had stopped recovering outstanding debts from people who had been moved on to prepayment meters. British Gas said it would no longer switch smart meter customers remotely to a prepay tariff this winter unless they asked for it.


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