Prepayment meters are typically installed under warrant when a customer cannot or will not pay their energy bill.
Under current rules, suppliers charge warrant costs including court fees of up to £900 back to affected customers.
Following a consultation, Ofgem has announced there is to be a £150 cap on the charge and has introduced measures to prohibit suppliers levying any prepayment meter warrant charges, and banning installations entirely, for the most vulnerable customers.
This includes for example prohibiting charges for people in severe financial difficulty, and banning installations entirely for people for whom the experience would be severely traumatic, for example due to mental health issues.
In addition, the regulator will introduce a proportionality principle covering costs and actions of suppliers, for all customers in the debt recovery process.
Ofgem said the measures, which will take effect from January next year, will protect consumers from unnecessary hardship due to having a prepayment meter installed under warrant.
Rachel Fletcher, Ofgem’s senior partner for consumers and competition, said: “Protecting vulnerable customers is a priority for Ofgem. At the moment vulnerable customers face a double blow when they’re hit with high warrant charges on top of existing debt – risking making their situations worse.
“The measures will protect all consumers, including the most vulnerable, from experiencing unnecessary hardship due to having a meter installed under warrant.
“We want to send a strong message to suppliers that using a warrant to install a PPM is a last resort. They must step in early to help customers manage debt through repayment plans.”
Welcoming the announcement, Craig Salter from Citizens Advice Scotland’s Consumer Futures Unit, said: “These charges make it harder for customers who are already struggling to manage their debts. In addition, our evidence shows that pre-payment meters often mean customers will be on more expensive tariffs, which means they are hit by higher energy bills just when they are least able to afford them.
“So while a cap is certainly a step in the right direction, we would also want to stress that imposing these kind of charges at all should always be a last resort, and energy companies should seek to help make sure consumers don’t fall into arrears in the first place.”