NHF: Poorest in society paying a 'prepayment penalty' of £113m every month

National Housing Federation logo for press releases

Monday, 22, Sep 2008 12:00

Some of the poorest in society are having to pay £113m every month in excess energy charges while the Government ‘hesitates’ over what action to take over the premiums being charged to people using prepayment meters.

The National Housing Federation will reveal today (Monday) at a Labour party fringe event that prepayment customers, who tend to be from low income backgrounds, are paying more than £100m in extra charges each month, even after the cost of maintaining the meters is taken into account.

Each year the ‘prepayment penalty’ adds up to more than £1.35bn.

While a typical prepayment meter costs £85 to maintain annually, prepayment customers are charged an average of £322 more than those on the best deals available. This is despite the fact that the Prime Minister and the Chancellor have both threatened tough action if the companies continue to make ‘unjustifiably higher’ charges to prepay meter users.

In March, the Chancellor said he would use reserve powers against the companies unless they came up with fairer prices for prepayment meter customers, while on 11 September the Prime Minister said the Government would use legislation ‘if necessary’.

However, the Federation says that the prepayment meter ‘rip off’ has been going off for so long that ministers must act now.

Federation Chief Executive David Orr said: “Every month the Government delays taking action on the prepayment meter rip-off the energy companies charge a combined penalty of £113m. This is outrageous.”

“The big energy companies are effectively charging a ‘prepayment penalty’ to meter users every month – while ministers hesitate over what action should be taken.

“Low income households on prepayment meters cannot afford to wait indefinitely for ministers to finally make up their minds. They need ministers to stop hesitating and intervene now.”

There are 5.7 million prepayment meter users, with an average household income of £16,000 per year. Although most of them are from vulnerable backgrounds, such as single mothers and those with disabilities, most big energy firms charge them more than any other customers.

British Gas charges those who pay via prepayment meters up to £567 more than its online direct debit customers, while Npower charges prepay customers up to £378 more.

The Federation told an on-going probe by the energy regulator Ofgem that the Government should immediately compel the big energy companies to equalise its prepayment meter charges with those on standard credit.

The Ofgem probe is due to publish its findings next month and Mr Orr will tell Energy Minister Malcolm Wicks at today’s Federation fringe meeting on fuel poverty that he wants the Government to take immediate action after its publication.

He said: “The fact that prepayment meter customers are facing yet another winter of having to pay through the nose for their energy is unacceptable and ministers must now show some backbone and stand up to the energy fat cats.”

Ends

• Nick Foley – 07748 931286

• Paul Rees – 07974 826587