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Ofgem announces price cap on prepayment meter costs to protect vulnerable consumers

About 8% of all gas customers are in debt to their suppliers. Credit: PA Wire

Ofgem has proposed a cap on charges for installing prepayment meters to help protect vulnerable customers.

The regulator said it wants a "firm limit" of £100 or £150 on the cost of installing the meters under warrant - an option used when customers fall into debt.

From April 2017, customers who use prepayment meters will be protected by an interim price cap, which will save them about £75 a year.

Companies currently charge an average of £400, but the fees have been reported to leave some of the most vulnerable customers up to £900 deeper in debt.

Ofgem is also proposing a complete ban on levying the charges against the most vulnerable customers, including those in hardship or struggling with physical and mental health issues or learning difficulties.

Ofgem's price cap will save customers who use prepayment meters about £75 a year. Credit: PA Wire

Under current rules, suppliers can charge warrant costs - which can include court costs - to affected customers.

Last year, about 86,000 meters were installed under warrant, and customers faced an average bill of £400, risking pushing them more into debt, Ofgem said.

It's deeply unfair that struggling customers get hit with high warrant costs when they're already grappling with debt, doubly penalising them.

Ofgem's role is to protect every consumer, including the most vulnerable. Suppliers need to help customers manage their debts.

Suppliers need to ensure that prepayment meters are only installed under warrant as an absolute last resort. Where they are needed, our proposals will protect customers by limiting warrant charges for all customers and removing them for the most vulnerable.

– Rachel Fletcher, Ofgem's senior partner for consumers and competition

Chief ombudsman Lewis Shand Smith welcomed the proposals, and said a price cap would help people facing financial hardships "plan and manage their outgoings, instead of pushing them further into debt".

About 3.5 million gas customers and 4.5 million electricity customers use prepayment meters, and about 8% and 6% respectively are in debt to their energy suppliers.