Scottish MP calls for energy companies to stop excessive charges for prepaid meter users

A Scots MP is challenging energy companies to drop punitive charges on prepaid electricity and gas meters, most of which are installed in the homes of low-income people.

East Lothian Labour MP Fiona O’Donnell has called for energy companies to establish a prepayment meter users charter after hosting a debate in the House of Commons last week.

The MP is concerned about the impact of the meters on low-income and vulnerable people, who often pay hundreds of pounds more a year than their neighbours. She says the meters are being used by big energy companies to mask rather than resolve problems for consumers.

Rather than being disconnected, energy companies are in the habit of moving people who are unable to pay their energy bills onto prepayment meters. The price per unit of electricty can be higher on pre-paid meters and if a customer has built up arrears, a company will also recoup the debt through standard charges on the meter. As a result, people often self-disconnect as they can't afford to top-up.

This practice has lead to an investigation last year by the Commons energy and climate select committee.

It is deeply concerning that action taken to reduce and manage debt can often have the opposite effect - Fiona O'Donnell

O’Donnell will now canvas support from MPs on the committee to put pressure on the big energy companies to sign the charter.

She said self-disconnection is a worrying trend and the government should be working with the regulator to introduce a code of best practice to standardise how suppliers monitor the energy usage of prepayment meter consumers.

She added: “In addition to this, it is deeply concerning that action taken to reduce and manage debt can often have the opposite effect – through unsustainable rates of recovery and the accrual of standing charges, the inability of consumers to switch tariff or supplier, and the imposition of charges where they are able to do so.

“A charter covering the rights and expectations of prepayment meter users on each of these points would leave less to chance and provide greater certainty for consumers.”

National charity Consumer Futures says 60% of prepayment meter households have an income of less than £17,500.

Norman Kerr, director of fuel poverty charity Energy Action Scotland said the issue of prepayment meters is an on-going concern, particularly where customers self-disconnect from their supply when they run out of money or cannot get to an outlet to top up their meter.

He backed the call for a charter: "It is worrying that a prepayment meter can be installed when perhaps all avenues to help the customer out of debt have not been fully explored,” he said.

“People should have good information about what to expect when they have a prepayment meter, but more importantly, there should be a recognised standard of good practice amongst suppliers when dealing with prepayment meter customers.”

While households across the UK have seen energy bills soar in recent years, disconnections as a result of debt fell between 2010 and 2012 by 51% for electricity and by 69% for gas.

The number of households paying for gas and electricity through a prepayment meter meanwhile has been increasing. Between 2011 and 2012, there was a 4% growth for electricity and 6% for gas, with 7.2 million people in the UK paying for gas and electricity through a prepayment meter in June 2012.

Shouldering the high cost of prepaid energy
7.2 million people in the UK are paying for gas and electricity through a prepayment meter
60% of prepayment meter households have an income of less than £17,500
Disconnections as a result of debt fell between 2010 and 2012 by 51% for electricity and by 69% for gas
The number of households paying for gas and electricity through a prepayment meter has been increasing – up 4% for electricity and 6% for gas between 2011 and 2012
Prepaid meter users are often unable to access best deals and they cost households on average £253 more each year