British Gas has been banned from force-fitting prepayment meters to protect its vulnerable customers, and all other major energy companies have agreed to suspend the practice after a Times investigation.
Ofgem, the energy regulator, issued a legal order last night preventing British Gas from breaking into its customers’ homes until it could prove that it was complying with all its legal obligations.
Jonathan Brearley, chief executive of the regulator, said that he would not hesitate to take “the strongest action in our powers”, adding: “We’ve ordered immediate action to protect British Gas’s customers.”
The order states that the company appears to be “contravening or is likely to contravene” licence conditions in the way that it has been pursuing debts and compels it to turn over relevant documents under threat of prosecution.
The intervention comes after an undercover reporter found that British Gas was routinely sending debt collectors to break into homes and force-fit pay-as-you-go meters, even when customers were known to be extremely vulnerable. Families forced on to pay-as-you-go meters have included a woman logged in official job notes as suffering with “severe mental health bipolar” and a mother whose daughter was known to be “disabled and has a hoist”. If families cannot afford to top up the meters, their heating or electricity is cut off.
The undercover reporter was among agents sent in freezing conditions with warrants to break into homes including one where a young mother was with her four-week-old baby.
Ofgem also wrote to all other energy suppliers in Britain yesterday asking them to suspend the practice of force-fitting prepayment meters. All the largest ones have confirmed that they are complying with the order.
In further developments:
• Hundreds of British Gas customers have told of feeling mistreated by the supplier, including a single mother who had to light her home with candles after being forced on to a prepayment meter.
• The boss of British Gas’s parent company, Centrica, said he was “really truly sorry”, as its shares fell after the revelations.
• Rishi Sunak said he was deeply shocked and concerned by the findings.
• The Financial Conduct Authority said it was closely reviewing practices at Arvato Financial Solutions, the service used by British Gas to collect debt.
Ofgem acted after The Times told it that new recruits to Arvato were told that the regulator had little influence and issued only “minimal” fines.
Energy companies can apply to magistrates’ courts for warrants allowing them to force entry into homes and fit a prepayment meter.
Amid rocketing energy prices, more customers have fallen into debt and applications for these energy warrants have risen, from 275,000 in 2019 to 345,000 in the 11 months to December. The Times reporter was employed by
Arvato and found that agents were incentivised with bonuses to force-fit the meters under warrants.
Centrica responded to the findings by suspending all warrant activity. The Ofgem order now requires British Gas by law to stop the forced installations until it proves that it is fully compliant with its legal and regulatory obligations. Brearley said: “We require all the documentation relating to its contract with Arvato to be turned over to us. It is a criminal offence to destroy evidence or provide misleading information. We expect full and open co-operation.”
Ofgem has also asked for a preliminary internal report by February 13 and details of the bonus system for agents.
The undercover reporter was among Arvato trainees shown a document with the names of several regulators. Referring to Ofgem, the trainer said: “I think the worst that would happen would be fines that in the larger picture of most companies are pretty minimal.”
There are seven million prepayment meters in British homes. Customers top up at shops with a card or through a smartphone app. It is more expensive than paying by direct debit and debt collectors’ bills are added to the debts.
Grant Shapps, the business and energy secretary, wrote to energy companies last month warning them to stop force-fitting meters. However, the undercover reporter found that British Gas had continued to do so.
OVO suspended all warrant activity in November. EDF and E.ON also confirmed they had suspended forced installation of prepayment meters.
A spokesman for Octopus Energy said: “We are not installing any prepayment meters at the moment.”
ScottishPower said: “We deplore the behaviours reported and have suspended all warrant installations.”
Centrica said warrants had only previously been used as a last resort after several attempts to resolve issues with customers. It recently announced a £10 million fund for prepayment customers. A spokeswoman said: “Protecting vulnerable customers is an absolute priority.”
Arvato Financial Solutions said it acted compliantly and in accordance with regulatory requirements at all times and that the Times findings did not represent the company’s views or its official guidance on how to interact with customers. It said it “appreciates the work of the regulatory authorities” and “if individual employees have stated differently this does not reflect the opinion or the practices of Arvato Financial Solutions”.
British Gas boss ‘truly sorry’ for poor treatment of vulnerable customers
The boss of Centrica has said he is “really truly sorry” for the behaviour uncovered by The Times, as shares in the company fell after revelations about its use of debt collectors.
Chris O’Shea, chief executive of British Gas’s parent company, gave a series of media interviews in an attempt to contain the scandal over the firm’s treatment of vulnerable customers.
He appeared to lay blame for poor behaviour of staff with Arvato Financial Solutions, which British Gas uses for debt collection. But he said he also took responsibility.
“The contractor that we’ve employed, Arvato, has let us down but I am accountable for this,” he told Today on BBC Radio 4.
“This happened when people were acting on behalf of British Gas. There’s nothing that can be said to excuse that. Every one of our customers deserves to be treated with respect.”
O’Shea said the company had suspended its work with Arvato, and an independent investigation had been commissioned. “Where we’ve got it wrong, we’ll make it right,” he said.
Shares in the FTSE 100 energy company fell by more than 3 per cent after Ofgem confirmed that it had launched a formal investigation into whether the company had breached licence conditions.
O’Shea also told Sky News: “Clearly we got it wrong on some occasions here. All I can say is that I am really truly sorry and we will make it right.”
The revelations come just two weeks before Centrica is expected to report bumper annual profits for 2022. It has said it expects its net profits to be at least seven times higher than a year earlier after its oil and gas and nuclear businesses benefited from high and volatile energy prices.
Martin Young, an analyst at Investec, said that while it believed British Gas energy supply would account for only 3.5 per cent of Centrica’s adjusted operating profits in 2022, the jump in group profits was “likely to be the focus for those who wish to suggest that profits are being made at the expense of the vulnerable”.
He described the behaviour revealed by The Times as “clearly not good practice, and most definitely not a good look”. He added: “The PR course that Centrica has to navigate has arguably got harder.”
Ofgem said: “These are extremely serious allegations from The Times. We are launching an urgent investigation into British Gas and we won’t hesitate to take firm enforcement action.”
Separately yesterday the regulator said its market monitoring had found “severe weaknesses” in customer service at Britain’s second-biggest energy supplier, E.ON, with a “very poor” performance in call waiting times and abandoned call rates. It also found “moderate weaknesses” at 11 other suppliers including British Gas, EDF, OVO, Scottish Power and Utility Warehouse.
An E.ON spokesman said that it had not been “able to provide the service our customers demand and deserve for a short period of time when demand increased drastically and unexpectedly across the industry, with a trebling in the number of people wanting to speak to us”. He said that it had “already introduced a number of measures which are leading to improvements that will get us back to levels of service we can be proud of”.