Watchdog demands action to end punitive prepayment penalties


London, U.K. — (METERING.COM) — March 7, 2008 – With energy consumers using prepayment (pay-as-you-go) meters now charged an average £255 ($515) more than those paying by online direct debit, U.K. energy watchdog energywatch has called for action to end this discriminatory pricing.

Energywatch wants suppliers to reverse this discrimination against prepayment meter users. More specifically the watchdog calls for greater pressure to be applied to suppliers to charge fairly, including:

  • Government must focus its pre-budget discussions with energy suppliers on solutions to discriminatory pricing
  • Through the Energy Bill, government must take power to require companies to offer meaningful social tariffs to their poorest customers
  • Regulator Ofgem must use its probe into the energy market to set out how the industry will stop using prepayment tariffs to exploit some of the poorest in society; and
  • energywatch also wants the archaic technology behind these meters to be scrapped and smarter metering to be introduced as quickly as possible. A condition for the success of smarter metering must be that the technology eradicates the prepayment penalty.

energywatch calculates that, even allowing for the extra costs involved with operating these meters, energy companies are generating more than £400 million ($807 million) each year in extra revenue from prepayment customers than they would if those customers were paying through online direct debit tariffs.

Research from BERR (the Department for Business, Enterprise & Regulatory Reform), Ofgem and the energy companies’ trade association – the ERA – shows:

  • More than 1000 prepayment meters are being installed in Britain every day to recover energy debts
  • One in three lone parents with dependent children, 1 in 3 people with a long term illness or disability, and 1 in 3 people who are unemployed and claiming benefit rely on these meters to pay for their energy
  • A third of the 4.5million households in fuel poverty use prepayment meters; and
  • Only 1 in 4 prepayment meter users knew they weren’t on the cheapest payment method.

Adam Scorer, energywatch Director of Campaigns, said: “It is simply scandalous that some of the poorest people in society are being forced to pay 31% more for their energy than those who have the means to access cheaper deals. This discrimination by energy companies is hurting those that most need help and is seriously undermining the fight against fuel poverty. Wringing our hands isn’t enough. energywatch will be applying maximum pressure on suppliers to change – government, regulators, MPs and others need to do so as well.”