Responsibility for the prepayment meter scandal exposed by the Times last week obviously lies with British Gas and its agent. “The contractor that we’ve employed, Arvato [Financial Solutions], has let us down but I am accountable for this,” said Chris O’Shea, the chief executive of Centrica, the parent of British Gas, conceding the bleedin’ obvious.
But the other party here is the regulator, Ofgem, which is supposed to police the sector but looks in urgent need of streetwise detectives who can smell danger. Grant Shapps, the business secretary, said at the weekend that Ofgem “have had the wool pulled over their eyes” and “need to raise their game” – judgments that sound entirely fair when you count the number of reports from outside bodies that had warned over many months of a potential calamity with prepayment meters, warrants and vulnerable customers.
Here, for example, is one of the headline recommendations from a business select committee report last July: “Ofgem must work with suppliers, ahead of this winter, to identify vulnerable prepayment customers at risk of self-disconnection and offer to convert them to credit mode to maintain their supply.”
In the same month, three debt charities – Citizens Advice, the Money Advice Trust and StepChange – warned along similar lines and called for safeguards to “protect those in financial difficulty from potentially harmful debt collection practices”. They offered case studies of bad corporate behaviour.
In September, Citizens Advice noted “an escalation of debt collection activity, with suppliers increasingly forcing customers on to prepayment meters” in a report called Out of the Cold?. At that point, the charity reckoned 450,000 people in 2022 could be forced to move to a prepayment meter.
By January this year, the charity’s follow-up report had put the figure at 600,000, a leap from 380,000 the previous year. It painted an alarming picture of customers who should be classed as “vulnerable” getting lost in bureaucracy and companies taking too little care to identify those who should be on the “priority services register”. Aside from saying it was “completely unacceptable” for vulnerable customers to be left without power, Ofgem merely said it would “consider the findings” in the report and “take further action as necessary”.
The regulator knows better now, thus the panicky attempt to close the stable door. British Gas has been issued with a legal order to cease all warrant activities until it can demonstrate compliance with regulatory standards. A full investigation has been launched.
Yet there was also something pathetic in Ofgem’s defence that it launched a series of compliance reviews last year to “drive up standards across the industry”. One of these reviews rated British Gas as having only “minor weaknesses” in its support of vulnerable customers. Another last September – almost unbelievably – said the company was the only one of its peers to have “no significant issues” in its support of customers in financial difficulties.
Given what we know now, why do these “deep dives” feel more like a gentle paddle in the shallows? One answer may be that reviews start by looking at company processes and training manuals plus listening to a few call centre interactions with customers. Unless there are specific reasons to dig deeper, Ofgem – as Shapps pointed out – seems to have been happy to swallow companies’ reassurances that rules are being followed.
This does not, to put it mildly, smack of firm regulation. One could blame lack of resources (although, with 1,600 staff, Ofgem is not a small organisation) or a lack of legal powers to conduct undercover operations. But part of the story, one suspects, is a regulatory mindset that is insufficiently sceptical. Charities were screaming about problems on the ground as “self-disconnection” numbers went through the roof and magistrates approved warrants en masse (now halted), but still the industry’s narrative was not challenged robustly.
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On the evidence of his speeches, Jonathan Brearley, Ofgem’s chief executive, genuinely seems interested in shifting to a more proactive approach. But, as ever, the hard bit is turning good intentions into action – and of ensuring that a “deep dive” is more than a data-collection exercise.
To repeat, British Gas and any yet-to-be-revealed miscreants are responsible for their own actions. But when the investigations are complete, there also needs to be an examination of Ofgem’s oversight. It was bad enough for the regulator when half the suppliers went bust because they couldn’t withstand rising wholesale gas prices; this episode is more serious.
