Poor ‘exploited’ by energy companies

05 December 2007

Watchdog accuses energy companies of exploiting some of poorest people in society

Consumer watchdog Energywatch has claimed that people without bank accounts cannot take advantage of cheaper tariffs.

The accusations arise from the fact that customers with pre-payment meters pay on average of £195 more a year for their energy than those paying by direct debit. On the higher end of the scale, some customers pay £304 more a year by using a pre-payment system.

Those who use online tariffs and pay by direct debit can get the cheapest deals.

Pre-payment meters offer a solution for those that prefer to budget their money and pay as they go rather than face a large bill at the end of the month or quarter. However, it has been reported that some people have no other option than to use a meter because they do not have bank accounts.

Allan Asher, chief executive of Energywatch said: “That they should ramp up the rates and exploit those with no access to alternative payment methods is morally bankrupt.”

There are 5.7 million energy pre-payment meters in Britain, which are common in rented accommodation and holiday homes. According to the industry regulator, Ofgem, pre-payment meters are installed by energy companies for those customers who have problems managing their energy bills.

Energywatch claims that:

• The number of meters installed is rising due to soaring energy bills (580,000 were installed in 2006)

• 63% of meters in 2006 were installed to recover debts, limiting the ability of those households to switch to cheaper suppliers and payment methods

• Pre-payment tariffs are more expensive to cover meter maintenance and the payment system

Ofgem calculations indicate that it costs £85 extra per household to supply energy via a pre-payment system. However, Energywatch argue that the industry is making nearly £300m a year from customers on such meters even when taking this cost into account.