More households fall onto prepayment meters as energy crisis bites

The energy crisis has pushed more households onto prepayment meters, according to new research from USwitch, as Brits struggle with soaring energy bills.

The latest data from the comparison and switching service reveals that the crisis has reversed a long-term trend for falling numbers of prepayment meters.

From the middle of 2019, the number of prepayment meters dropped for nine consecutive quarters, plunging from a total of 7,837,471 in the second quarter of that year, to 7,320,329 in the third quarter of 2021.

However, the number of prepayment meters then rose to 7,352,808 in the fourth quarter of 2021, and hit 7,380,697 in the first quarter of this year – an increase of almost 60,000 in six months. 

If the current rate continues, another 30,000 gas and electricity meters will be moved to prepayment in the last quarter of this year.

This would mean 10,000 meters being switched to prepayment every month.

Uswitch fears this trend will put thousands more households at risk of self-disconnection.

It is now calling on the Government to ensure prepayment meter customers at risk of self-disconnection are considered the highest priority for further support beyond April 2023.

This when the Energy Price Guarantee is now expected to conclude, with the Government instead pledging targeted support from next spring.

Cornwall Insight currently expects the price cap to climb over £4,000 per year next April – more than sixty per cent above the £2,500 average price households currently face.

Uswitch: Prepayment meters a ‘worrying’ trend

Households which fall behind in their energy bill payments can be pushed onto prepayment meters by suppliers.

They have to be regularly ‘topped up’ – intended to prevent bill-payers from falling deeper into energy debt. 

However, the pay-as-you-go nature of prepayment meters can push households into self-disconnecting when they can’t afford to top up.

Daily standing charges continue to pile up even if homes aren’t using any electricity, which can mean that when prepayment meter customers go to top up, they find their credit is consumed by paying this debt.

Prepayment meters cost the average household around £50 more per year year in standing charges compared to an equivalent direct debit customer due to the cost of the extra infrastructure needed to accept payments. 

Richard Neudegg, director of regulation at Uswitch.com, comments: “The rise of prepayment meter numbers is a worrying reversal of a trend after nine consecutive quarters falling – suggesting households are becoming increasingly at risk this winter. 

“With energy prices set to rise again in April, this is a warning of things to come and we will most likely see more and more households moved to prepayment meters in the coming months and years.

The findings follow reports of wider supplier failings for vulnerable customers.

Ofgem recently found that three suppliers – TruEnergy, Utilita and ScottishPower – had shown “severe weaknesses” in the way they support struggling customers,

Customers on prepayment meters will also suffer costly standing charges.

This is a set daily amount established by Ofgem that Brits have to cough up, regardless of how much energy they use.

It covers the cost of supplying the property with gas and electricity, alongside the clean-up bill from the market crisis that saw 30 suppliers collapse over the past 12 months.

Standing charges are contentious and have faced criticism from charities such as Citizens Advice as they add hundreds of extra pounds on to the bills of vulnerable households who use little to no energy.

Ofgem has revealed standing charges will rise to an average rate of 28p for gas and 46p for electricity per day when the new cap comes in next month – a slight increase on current levels of 27p and 45p respectively.