Ofgem consults on PayPoint’s commitments offered in energy prepayment market

The regulator had launched an investigation in August 2017 to examine whether PayPoint had abused a dominant position by using exclusivity clauses in its contracts with energy suppliers and retailers

Pathway to COP26 report

Ofgem is seeking views on the commitments offered by PayPoint and a number of its subsidiaries in an investigation into whether the company infringed regulations in the energy prepayment market.

PayPoint provides services to its energy supplier clients which enable their prepayment meter customers to top up their credit, either in person at one of its 28,000 retail outlets or remotely, for example, using a website or mobile phone.

The retailers are paid a commission for these top up payment transactions made using a PayPoint terminal, which the company transfers to the relevant energy supplier in exchange for a transaction fee.

Ofgem had launched an investigation in August 2017 to examine whether PayPoint had abused a dominant position by using exclusivity clauses in its contracts with energy suppliers and retailers, in a way that was likely to restrict or distort competition in the market.

The regulator had suspected PayPoint’s actions distorted competition and consumer choice in this market to the detriment of prepayment energy customers, many of them in vulnerable situations.

PayPoint has now offered Ofgem commitments to remove these exclusivity provisions concerning prepayment services from current contracts and any future contracts entered into during the next five years with energy suppliers and retailers.

It has also agreed to offer separate contracts to its energy supplier clients for the provision of over-the-counter (OTC) and non-OTC prepayment services.

This would mean energy suppliers and retailers would be free to contract with other payment service providers and use other providers’ equipment for processing OTC and non-OTC payments for their prepayment energy customers.

In addition, PayPoint has offered to make a £12.5 million donation to Ofgem’s Energy Industry Voluntary Redress Scheme.

The regulator stated: “Ofgem’s provisional view is that the commitments offered by PayPoint address Ofgem’s concerns and if implemented, they should ensure that competition is no longer distorted.

Ofgem will now consider any comments raised in the public consultation before determining whether to accept the commitments. At this stage, Ofgem is minded to close the investigation with the acceptance of these commitments.”

It is inviting views on whether PayPoint’s proposed commitments address Ofgem’s competition concerns until 15th September 2021, before making a final decision on whether to accept the commitments.

If you enjoyed this story you can sign up to our weekly email for Energy Live News – and if you’re interested in hearing more about the journey to net zero by 2050, you can also sign up to the future Net Zero newsletter. 

Latest Podcast