Cash-strapped households unable to afford their monthly energy bills are being pushed on to prepayment meters in record numbers, with 10,000 a month forecast to be installed this winter as the cost of living crisis deepens.
The price comparison website Uswitch said the startling trend – after more than two years when the number of meters has been falling as more homes moved to direct debit – was a worrying sign, as customers could disconnect when usage and bills were likely to be highest at the coldest time of the year.
“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,” said Richard Neudegg, director of regulation at Uswitch. “Families and individuals on prepayment meters will be plunged into darkness as they self-disconnect when they can’t afford to top up.”
The vast majority of suppliers put struggling customers on prepayment meters rather than disconnecting them. However, many of those customers then effectively disconnect themselves by not topping up the meter. Prepayment meters also cost the average household about £50 more a year in standing charges compared with an equivalent direct debit customer.
Using Ofgem data, the comparison site found that 7.38m homes were using pre-paid meters in the first quarter, up from 7.35m in the final three months of last year, which it estimated equated to almost 60,000 new meters being installed across the six-month period.
Uswitch said that based on current trends it expected 10,000 more homes a month to turn to pre-payment meters this winter. It said consumers who were most likely to have to switch were those least able to afford rising energy costs, making them the most at risk of stopping top-up payments as costs continued to rise.
Last week, the chancellor, Jeremy Hunt, rolled back former prime minister Liz Truss’s pledge to freeze energy bill rises, reducing support from two years to six months.
The plan, which could change again with Rishi Sunak as prime minister, now offers a £2,500 cap on the annual price of the typical dual-fuel bill until the end of April. After that point, support will only be offered to the most vulnerable people, with forecasters predicting that a typical household would face a rise in energy costs to more than £4,300 annually.
“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,” said Neudegg.
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The Department for Business, Energy and Industrial Strategy said the government’s energy price guarantee would reduce bills this winter by “roughly a third” of what they otherwise would have been. It added that the most vulnerable households were receiving £1,200 in additional direct payments.
A spokesperson said the Treasury’s review of energy support from next April would focus help on “those in need” while reducing costs for the taxpayer.
