The energy companies are to be investigated by the regulator Ofgem after the number of households struggling with their bills being forced onto pre-paid meters has increased sharply.
Ofgem may consider taking legal action if it determines that the increase in the number of homes being forced into pre-payment meters proves that companies are not properly looking after vulnerable households.
The move by Ofgem, which is also considering cheaper social tariffs available to some low-income households according to the BBC, comes after business secretary Grant Shapps told providers to stop the practice or face “name and shame”.
Shapps has written to energy suppliers telling them they are not doing enough to help vulnerable customers and should offer credit or debt advice, with pre-payment installations as a last resort.
Earlier this month, the Guardian revealed that 3.2 million people – the equivalent of one person every 10 seconds – were left with cold and dark homes last year after running out of prepaid credit, according to data from Citizens Advice.
Jonathan Brearley, chief executive of Ofgem, will give a speech on Monday expressing his concern about the rise in households being switched to pre-paid meters “sometimes without them even knowing it”, the BBC reported.
“The numbers of forced installations of prepaid meters are extremely high,” he will say in a speech at the Institute for Government. “It is simply not acceptable that vulnerable customers are left in the dark and cold during the winter.”
Brearley will say Ofgem is to launch an industry-wide review of the prepayment switching process implemented by energy suppliers.
“[The review will focus] specifically on self-disconnects, remote switching and forced installations, and the controls companies have around any decision to put a customer on a pre-paid meter, he says. “If we find that they have not taken due care in this process, we will take further legal action against them.”
Under existing rules, utilities are not allowed to forcibly install prepaid meters or remotely switch a household’s smart meter to a prepaid tariff without first investigating the financial assistance offered or carrying out appropriate assessments, including identifying any vulnerabilities.
However, the regulator does not have the legal power to completely ban suppliers from moving customers to prepaid meters.
Hundreds of thousands of customers have been switched to more expensive pre-paid meters in recent months, often unwillingly and without the offer of support, after failing to keep up with rising energy bills.
Last week ScottishPower, which has almost 5 million customers, said it had stopped collecting outstanding debts from people who have been moved to prepaid meters. British Gas said it will no longer remotely switch smart meter customers to a pre-paid tariff this winter unless they request it.