'£195 prepayment penalty' for poorest Brits

Wednesday, 05 December 2007 12:00

Prepayment gas and electricity customers are paying on average £195 extra a year for their services, with some are paying up to £304 more, than energy firm's best online tariffs.

New figures from watchdog energywatch show prepayment customers are paying an additional £543 million a year, while the extra costs of running the meters faced by energy firms are only £296 million - meaning firms are taking in an extra £296 million a year.

Energywatch also claims the utility firms are hitting poorest customers hardest - as it is households without home access to the internet and bank accounts which are being forced onto meters to meet energy debts as they cannot gain the cheapest online deals and have to use prepayment meters.

"Consumers without internet or banking facilities are excluded from better deals. These figures show the welcome actions by some suppliers to combat fuel poverty are offset by the extra costs and poorer service inflicted on those forced onto prepayment charges," said Allan Asher, chief executive at energywatch

He added: "Another industry where the poor are exploited through higher rates is the personal credit market where poorer people are forced to pay much higher rates of interest.

"Energy companies, who are providing essential-for-life services, should take no comfort from such a comparison."

The energy watch figures show the average dual-fuel direct debit customer pays £772 a year for gas and electricity, while a prepayment customers pays £967 - a difference of £195.

The difference was £249 for British Gas customers, £250 for those with npower, and £229 for Eon users.

The highest extra paid was recorded in Wales for npower customers at £304 extra.

However, the Energy Retailers Association (ERA) has questioned the energywatch figures and said high charges were due to higher costs of running prepayment meters.

ERA chief, Duncan Sedgwick, told BBC Radio 4's Today programme: "I really don't know where energywatch have come up with these sorts of numbers."

He said: "It is right to say in some instances some companies do have a small extra surcharge for prepayment meters, but that's because the prepayment meter is more expensive; the infrastructure for providing cards or keys or whatever it is that the particular meter uses is more expensive."

"There is absolutely no extra element of profit."

Mr Sedgwick also defended energy suppliers against the charges that prepayment meters are only used by the poorest customers.

"It's very, very important to stress though prepayment meters are the meter of choice for a great many customers," he said.

"It isn't right to say that prepayment meter customers are poor. There are some of them who would come into that category, but only something like 20 per cent of prepayment meter customers come into this category of fuel poor or vulnerable.

"The vast majority are on that meter because they like that means of payment, just like some people like pay as you go mobile phones."

Consumers on prepayment meters can switch between suppliers - although they are the least likely to do so - and Ofgem figures show they could save on average £100 by doing so.

They can also switch to standard metering, although if a credit check is failed a deposit may have to be paid.

Ofgem estimates five million households will have changed energy provider in 2007 - and almost half of all households have done so since 1998.

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