Energy theft guidance for landlords
By Alan Boswell Group
It’s a sad fact, but energy theft – sometimes known as ‘illegal abstraction’ – is at record levels. Figures from Crimestoppers reveal 12,076 reports of energy theft in the year to April 2023, up from the 7,776 instances in the previous 12 months. The Retail Energy Code Company estimates that this costs consumers £1.4 billion annually, adding up to £50 to each household’s energy bills. Indeed, given that energy theft is thought to affect up to 1 in 150 homes in a year, it’s an issue that growing numbers of landlords have to face.
Energy theft by tenants can be highly dangerous and difficult to detect. When electricity and gas are being stolen, it can also cause major problems for landlords. In this article, we look at why illegal abstraction is on the rise, offer tips on spotting it and advise you on how to best protect yourself with insurance cover.
What is energy theft?
Energy theft is exactly that – the theft of gas, electricity, or both. People can steal electricity by bypassing their meter or connecting to an electricity line belonging to someone else, such as a neighbour. Similarly, stealing gas by bypassing meters or tapping into a nearby supply is possible.
Reasons for illegal abstraction of electricity and gas
There are many reasons why a tenant might illegally abstract electricity or gas. Given that energy theft has significantly increased during a cost-of-living crisis, it’s reasonable to assume that dwindling household finances are a key factor.
In some cases, criminals will target certain areas and offer to bypass meters or tap into energy lines for a fee. In others, householders will attempt to do it themselves, often following instructions found on the internet.
There’s also another reason a tenant might steal electricity – drugs. To grow cannabis indoors, you need large amounts of energy to power lighting, irrigation, and ventilation systems. As the average cannabis farm consumes 12,000 kWh of electricity monthly (four times the average household uses in a year), criminals generally steal electricity to avoid large bills and suspiciously large meter readings.
What are the risks associated with energy theft?
The physical risks associated with energy theft are clear. Tampering with electricity meters and cables is extremely dangerous and can lead to electrocution, sparking and fires. Interfering with a gas supply can result in leaks and potentially explosions. In short, if a tenant is stealing energy, they are putting your property at risk.
There are also legal risks. Illegal abstraction of electricity is a criminal offence under Section 13 of the Theft Act 1968. Tampering with gas mains and meters is an offence under Schedule 2B of the Gas Act 1986. According to Stay Energy Safe, energy theft can result in five years imprisonment and a £2,000 fine, but may be higher depending on the scale of the theft.
While the person responsible for the theft will be liable to pay for the stolen energy, landlords may face bills for making the electricity or gas supply safe again.
How to spot energy theft
As a landlord, you should undertake regular property inspections. These give you a good opportunity to look for signs of energy theft.
The most obvious place to start is with the electricity and gas meters. Warning signs include:
No numbers are displayed on the meter
Numbers not moving or running backwards
A meter that runs after all circuit breakers are switched off
Scorch marks on the meter
Prepayment meters working with no credit
Crackling noises
The smell of gas near the meter
Extra wires that don’t connect to the fuses or trip switches
Extra pipes or rubber tubing added around the gas meter
A back-to-front meter
Other signs to look for are:
Wires leading to neighbouring properties
Sparks from the meter, sockets, or wiring
Electric shocks from appliances, taps, bath or shower
Smell of gas within the property
Meters that are locked away when they weren’t before
Unusually large gas flames on the cooker hob
Gas flames that burn orange or yellow instead of blue
While all these things may indicate illegal abstraction, two major red flags indicate a tenant may be involved in energy theft. The first is a tenant who refuses to give you access to the meters. The second is when an energy company gets in touch to tell you that energy use at the property is unusually low (it’s getting easier for utility firms to monitor usage thanks to the increasing prevalence of smart meters).Of course, these signs could indicate a problem with the gas or electricity supply rather than energy theft. It is the landlord’s responsibility to ensure that the property is safe, and any concerns should be addressed urgently.
What to do if you discover energy theft?
If you discover energy theft, you should first report it. You can either report it to the police or to Stay Energy Safe, an initiative operated by Crimestoppers that works with both OFGEM and energy suppliers. You can alert Stay Energy Safe by using their website or by calling 0800 023 2777.
Ideally, you will have a clause in your tenancy agreement that explicitly forbids interfering with the energy supply. If you have, you could start Section 8 eviction proceedings under Ground 12, which can be used when a tenant breaches the agreement. Otherwise, you could evict them under Ground 13, which applies when a tenant has damaged the property. Failing these, you could opt for a Section 21 eviction.
How to prevent energy theft
If a tenant is determined to steal energy, it can be difficult to prevent. That said, there are some steps you can take to minimise the risk of it happening. These include:
Undertake regular property inspections. If a tenant won’t let you exercise powers of entry to inspect a property, it can be a warning sign of many problems, including energy theft. However, repeatedly refusing access is normally a breach of contract, so you can seek an injunction to gain entry or take action to repossess the property.
Make sure you’re using meter seals. Meters should have tamper-proof seals. If they are missing or damaged, it may indicate energy theft. If they are not on the meter, speak to the energy provider, ideally before letting the property.
Arrange regular electrical safety inspections. Ensure you comply with the law by getting a qualified electrician to inspect the property and issue an Electrical Installation Condition Report (EICR) at least every five years. EPC regulations also require that your property has an energy efficiency certificate every ten years. These inspections may uncover evidence of energy theft.
Educate your tenants. Make it clear to tenants at the beginning of a tenancy that energy theft is dangerous, carries major legal penalties, and can endanger their lives and your property.
Report any suspicions as early as possible. If you suspect a tenant is involved in illegal abstraction, report it to their utility provider or to Stay Energy Safe.
Insurance cover relevant to energy theft
Energy theft poses a serious threat to landlords’ properties and finances. For these reasons, it’s wise to ensure you have good insurance cover. Below are some issues you could encounter and the insurance to protect against them.
Explosion or fire. If you have landlord insurance covering the building, you should be covered in the event of an explosion or fire. Your policy will allow for the repair or rebuild of the property as appropriate. However, if you knew your tenants had tampered with the energy supply and hadn’t reported it, your policy would likely be invalidated.
Damage to gas / electricity equipment. This is a difficult situation to insure. If you know a tenant has damaged equipment, you may be able to claim under malicious damage insurance if you report it to the police and get a crime reference number. Otherwise, you’ll probably have to pay to put any damage right.
Uplift in energy bills. Unfortunately, you can’t insure against this. If you are responsible for paying the bills and pass on the cost via the rent, you’ll have to pay for any stolen energy. However, if utility bills are included in the rent, tenants have no real motivation to steal energy unless they set up a cannabis farm (bypassing the meter will prevent suspiciously high readings). On the positive side, if a tenant is responsible for energy bills, they are liable for the cost of stolen energy, even if they have since vacated the property.
Cannabis farms. If a tenant damages your property by installing a cannabis farm, your landlord insurance policy usually covers this (subject to limits and conditions being met). If you have legal expenses insurance, this would cover eviction costs and any legal and court fees.
Illegal abstraction is not a victimless crime. It pushes up honest people’s energy costs, can cause damage to property and can injure and kill. It can also cause major headaches for landlords, whether through repairing damage, dealing with the police and energy companies, or having to go through the ordeal of eviction proceedings. For all of these reasons, it’s vital to undertake robust tenant referencing at the beginning of every tenancy and to make sure you have the right insurance in case energy theft becomes an issue.
Need help with your insurance?
If you are a landlord, Alan Boswell Group can help you find the right cover for your needs. Whether you need cover for a single property or a whole portfolio, our team of experts is here to help. Call us today.