New switching rights will benefit prepayment energy customers

Thousands of energy customers who use pre-paid meters will be free to switch to cheaper utility deals under new rules announced by energy regulator Ofgem.

All of the “big six” suppliers, EDF, Eon, npower, British Gas, SSE and Scottish Power have agreed to let their customers who use prepayment meters to switch if they have debts of up to £500, an increase from the previous £200 limit.

The changes are part of a wider agenda taken up by the regulator to try and get energy firms working with customers to resolve arrears and to ensure that disconnection of energy supplies is only used in exceptional circumstances.

This includes simplifying bills, reducing the bewildering array of tariffs held by each energy supplier and making it easier to switch suppliers.

In total, there are 320,000 gas customers who use a prepayment meter and owe money to their supplier and a further 315,000 electricity customers in the same situation.

Many of these customers were put onto prepayment meters as part of a repayment plan as a result of debt problems in the past with their suppliers.

Ann Robinson, Director of Consumer Policy at uSwitch.com, says: "This move is very welcome as it opens up the opportunity for energy customers struggling with debt to move to a cheaper deal.

"However, we would urge Ofgem to go one step further and to provide the same clarity for consumers on standard meters who are also in debt."

Ofgem is expected to announce this week that there has been a 59 per cent fall in the number of gas customers being disconnected as well as a 54 per cent fall in electricity customers being disconnected, partly due to being given more time to repay debts.

However, for customers who are in debt, the average debt for gas customers rose to £371 in 2011, up from £339, whilst the average electricity debt dropped slightly to £357.

Sarah Harrison, senior partner for sustainable development at Ofgem, said:"We welcome the significant falls in the number of households being disconnected, but Ofgem remains determined to ensure suppliers continue to focus on helping consumers manage their energy bills and reduce their debt.

"That's why we are pleased to announce a commitment from major suppliers which will permit tens of thousands more prepayment meter consumers in debt to choose the cheapest energy deal."

Audrey Gallacher, Director of Energy at Consumer Focus said: "Measures to make it easier for customers who use pre-payment meters to switch suppliers are a welcome step in the right direction. For a long time these customers have suffered from the double whammy of high prices and reduced choice. The key now is to ensure that pre-pay users actually take advantage of the scheme."

Energy Secretary, Ed Davey, is due to announce new compensation measures for customers who have been mis-sold products or overcharged.

Ofgem already has the power to fine energy firms, but the money goes to the government.

Under new proposals to be outlined by Mr Davey at the Liberal Democrat conference in Brighton, Ofgem will be able to force suppliers to pay compensation directly to the customers affected.

A British Gas spokesperson said: "Increasing the level of debt prepayment customers can transfer between suppliers is the right thing to do.  British Gas supports the rising of the debt ceiling to £500 to ensure even more customers can benefit from moving to a better deal."

Read more: A step-by-step guide on how to find the cheapest energy deals