Utilita chief calls for ban on ‘archaic’ prepayment meters
The government should scrap traditional prepayment meters and only allow suppliers to install smart prepayment meters as part of its crackdown on the energy sector, the boss of a leading energy firm has argued.
Bill Bullen, chief executive of Utilita, told City PM he supported Chancellor Jeremy Hunt’s plans to eradicate the “prepayment premium” – the price difference between the standard variable tariff and prepayment meters.
Currently, that stands at around £45 under the energy price cap, which is set at £3,280 per year for regular customers and £3,325 for prepayment users.
However, he opposed a prepayment meter ban as he argued they empowered people to make decisions over their usage to save money and energy, driving down bills and easing carbon emissions.
In his view, this could be best achieved through smart prepayment meters.
He said: “The only way forward is fairness, which is why we fully support plans to eradicate the prepayment premium. Households, the vast majority of whom choose Pay As You Go (PAYG) because they want to keep track of their energy spend, will now get control – but without the premium.
“And while the Chancellor’s ‘fairness reforms’ to energy are in focus, the most important change required is for a full ban on the installation of old-style traditional PAYG meters, which leave households high and dry in times of need. These archaic meters also detract from the host of benefits you get with Smart PAYG.”
Bullen is not the only energy firm to welcome Hunt’s eradication of the prepayment premium.
Rival supplier Ovo Energy has backed the measure and called for prepayment meters to become the cheapest form of energy for customers.
A spokesperson said: “Historically, prepayment meter customers have always paid less for their energy than those paying in arrears, but more than those customers paying by Direct Debit. Ovo is calling for Ofgem to lower the unit rates under the energy price cap to make sure a prepayment meter is the cheapest way to pay for energy.”
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Typically, prepayment meters have been used by customers hoping to control their finances, with higher proportions of low-income users opting for the devices.
Alongside removing the prepayment premium, Hunt is expected to sustain current levels of energy support at a subsidised rate of £2,500 per year for the next three months to shield households in need.
He will make further announcements in the budget at the House of Commons tomorrow.
Energy bills are expected to sharply fall in the second half of 2023, when season-ahead contracts start to reflect plummeting gas prices which have been visible on the spot market for months.
Ovo has called for the government to bring in a social tariff, while City PM revealed Utilita had sent a letter calling for current support to be extended a further 12 months.
Bullen is set to be grilled by MPs tomorrow in Westminster at the BEIS Select Committee on the use of prepayment meters, warrants and forced installations.
The event will also be attended by British Gas owner Centrica chief exec Chris O’Shea, Ofgem’s senior team and Arvato Financial Solutions.
This follows allegations Centrica has been using debt agents from Arvato to break into vulnerable customers’ homes to fit energy meters, as first reported in The Times last month.
Since then Ofgem has asked suppliers to suspend all applications to install prepayment meters, as first reported by City PM
They will not be allowed to begin applications again until April.