Prepayment meters scandal sees 40,000 people owed compensation from energy companies

Martin Lewis’ Money Saving Expert (MSE) has raised urgent awareness about a significant financial relief opportunity available to many households across the UK. Specifically, it has revealed that approximately 40,000 energy customers may be eligible to receive compensation of up to £1,000 due to forced transitioning to prepayment meters.

Prepayment meters scandal: another dire headline for energy companies

This development follows Ofgem’s announcement that it will disburse a total of £5.6 million from eight energy companies, addressing the concerns regarding how vulnerable customers were treated in the energy market.

The compensation structure entails various amounts based on individual circumstances; while the potential payout ranges from £40 to £1,000, it is noted that very few will actually receive the full amount.

According to MSE, those entitled to the maximum compensation amount will be those who were switched to prepayment meters without just cause. This situation highlights the ongoing turmoil many face in managing energy costs, particularly amid a cost-of-living crisis that has given rise to numerous challenges for low-income households.

Ofgem, the energy regulator, has launched an investigation into the practice of switching customers onto prepayment meters, particularly targeting those who fell behind on payments between January 1, 2022, and January 31, 2023.

This review stems from widespread concerns about the detrimental impact forced installations of prepayment meters can have on vulnerable individuals, many of whom are struggling with rising bills. It is worth noting that energy firms affected by this renewed scrutiny have already paid out £55 million in combined financial support.

‘One case is one too many’

Speaking on these developments, Tim Jarvis, Ofgem’s director-general of markets, emphasised the regulator’s commitment to rectify situations where prepayment meters customers were treated inadequately. He stated:

While the number of cases where a prepayment meter was wrongfully installed is relatively low compared to the total number of PPM customers, one case is one too many.

This sentiment underscores Ofgem’s drive to implement stricter rules to safeguard consumers, a response to the possible exploitation of the most vulnerable members of society.

The recent enhancements in regulatory frameworks include higher protections for consumers, particularly households with young children and older residents. A newly introduced Involuntary Prepayment Meter Code of Practice aims to prevent such wrongful installations from occurring in the future.

This regulatory overhaul, which began to take effect in November 2023, is a direct response to the continued outcry from advocacy groups and the public for better treatment of customers who find themselves in precarious financial positions.

However, progress remains slow, as highlighted by previous reports indicating that only a fraction of those affected have received compensation thus far.

Prepayment meters: the thin end of the chaotic wedge

Back in April 2024, it was reported that just over 1,500 customers had been compensated for wrongful prepayment meters installations, contributing to the overall sense of frustration surrounding the efficiency of redress mechanisms employed by energy firms.

Shocking as it may be, for a system designed to protect consumers, delays in compensation distribution not only undermine trust but also considerably exacerbate the financial strain faced by already vulnerable families.

Meanwhile, energy companies like E.ON Next are also under scrutiny after revelations that they had failed to provide final bills and refunds to nearly 250,000 prepayment meter customers from early 2021 through late 2023.

In November 2024, Ofgem mandated E.ON Next to pay £14.5 million in compensation, breaking down into various categories of financial support, including credit refunds and statutory compensation.

As energy bills continue to pose an obstacle for many households, while energy companies profits’ soar, the ongoing investigations and regulatory reforms offer a glimmer of hope for the relentless struggle to ensure fair treatment.

The need for systemic changes is painfully echoed in the experiences of service users who deserve security in their home energy supply—especially in a time of rising expenses.

Featured image via the Canary