Yorkshire peer's plan to tackle 'scandal' of higher energy bills for prepayment meter users

Soaring energy bills are already causing sleepless nights for many as they add to the growing cost-of-living crisis for millions of people, but the pain from next week’s price cap rise will be felt particularly keenly in households with prepayment meters.

The energy price cap is rising from April 1 by £693 to £1,971 per year for those on default tariffs paying by direct debit, but for prepayment customers the increase will be even more pronounced - going up by £708 to £2,017.

Prepayment meters have been cited by the Leeds-based StepChange Debt Charity as an example of the “poverty premium”, in which poorer people end up paying more for goods and services than other customers.

While the meters allow users to pay smaller amounts more frequently, it typically ends up costing more. Credit is also eaten up by a daily standing charge that has to be paid even on days when no gas or electricity is used.

When the announcement about the energy price cap increase was made last month by Ofgem, it said the 4.5m prepayment customers affected by the change were being harder hit as a reflection of “the higher cost for energy companies to serve them”.

One person deeply alarmed by the situation is the Liberal Democrat peer, Baroness Kath Pinnock.

The former Kirklees Council leader highlighted the “scandalous” situation of the poorest paying more for energy and urged the Government to ensure that energy companies charge prepayment customers the lowest rate.

In response, Department of Work and Pensions Minister Baroness Stedman-Scott said she could make “no promises” anything would actually change.

Baroness Pinnock, a former school teacher, admits that she was unimpressed with the response - particularly with even bigger energy prices rises on the horizon again in October when the price cap is next reviewed.

“This is a long-standing issue that I have been concerned about for a long time,” she says.

“It has been highlighted now because of the huge rise in energy bills that folks are going to have to pay and the issue is this - if you are unable for whatever reason to pay a council or electricity bill on time or you run into a bit of debt, the supplying companies force you to go on to a meter payment scheme.

“The awful thing about that is they charge more per unit of energy than if you are able to pay your bills.

“So those who are struggling the most are asked to pay the most for their energy.

“That is just the wrong way round and unacceptable in my view.

“We’re also very concerned about people who are going to be cold next winter, because they dare not put the heating on. Of course from being cold what follows is health problems quite often if you’re very young or very old or you’ve got already got health issues.

“It does seem to me just unacceptable that those who are least able to pay, pay the most. How can that be right?

“In Kirklees, where I’m still a councillor, there are nearly 20,000 households on prepayment meters. That gives you the scale of it. On the whole, between six and eight per cent of the country are on prepayment meters.

“That’s a lot of people. They are having to worry even more than everyone else about this huge hike in their gas and electricity and it should not be like that.”

She says that without effective action from the Government and energy companies, by next winter there will be many “struggling to avoid food and struggling to afford heating”.

“I think it is important for the energy companies to set up more effective social charging schemes than they currently have. They all have some sort of different schemes to help people who are unable to pay.

“I think they need to work even harder so that people who are forced to be on meters will pay the same rate as everybody else because that’s the right thing to do.”

She adds: “The standing charge is another issue.

“After I raised this issue in Parliament, I had somebody who contacted me to say they had not been able to afford gas for four weeks in the winter.

“A charity provided them with some funds to have some heating. What they found was the first £10 of that funding was taken up by the standing charge, which is 28p per day.

“So you get into debt, you can’t afford heating and then they say, ‘hard luck, the first thing you have got to do is pay a whack of money before you can get any heating’.

“None of that is right.”

Baroness Pinnock says she is determined to make a difference on the issue.

She adds: “What I won’t do is just stop at the one statement in the Chamber to the Minister.

“I’m gathering lots of evidence from across the country about how it is hurting people and I will put that information to the Ministers to say, ‘you’ve got to do something’ and write to Ofgem and say: ‘As a regulator, you can change this’.

“I shall keep going because it is just wrong.

“We’ve got to do all that we can to help those people who, for whatever reason, are going to be in real difficulty financially.

“And there will be people in real difficulty this coming year.”

MP highlights issue of elderly using prepayment meters

Hull West and Hessle MP Emma Hardy raised concerns about older people being more exposed to issues with prepayment meters in Parliament earlier this week.

The Labour MP told Parliament that many older people prefer prepayment meters as they feel they do not want to owe money.

But she said it means they are more exposed to higher bills than people who go onto direct debits.

“I’ve spoken to so many elderly people who have these prepayment meters because they have this very traditional, and I have to say probably quite right, idea that you don’t owe money, you pay for what you want, and you pay for it upfront,” she told MPs.

“But this isn’t a very fair system.”

Download the latest episode of Pod's Own Country with Kath Pinnock

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