Energy UK reports that the prepayment meter (PPM) moratorium is causing a monthly debt surge of approximately £30 million.
Responding to Ofgem‘s Call for Input on the allowance for debt-related costs, the trade association has emphasised the need for effective debt recovery mechanisms that protect consumers and ensure the viability of the sector.
The association has also stressed the importance of addressing energy affordability to prevent further debt accumulation without ongoing government support.
While Energy UK supports action for cost recovery, it believes the mechanism should be non-distortionary and avoid favouring certain suppliers.
The association criticises the current price cap design, highlighting the inadequacy of the notional efficient supplier approach.
Energy UK welcomes the Department for Energy Security and Net Zero consultation on price protections but urges Ofgem to prioritise a more joined-up and holistic decision-making process, particularly in the upcoming Opex Review of the price cap.
Energy UK expressed several concerns with Ofgem’s approach, including the complexities and potential unfairness of the proposed float and true-up mechanism for debt adjustment.
An Ofgem spokesperson told ELN: “We recognise, of course, that our robust action on PPMs could lead to greater levels of non-payment of bills and therefore impact the cost of debt owed to energy suppliers.
“That is why, in parallel to our work on bringing the supplier-agreed Code of Practice into the supply licence, we are therefore also working to gather evidence on debt-related costs, including through a Call for Input published on 18th April 2023.”