Why rising use of prepayment meters could be ‘disconnection by back door’

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Calls are growing for a winter ban on energy suppliers forcing struggling households on to prepayment meters, amid evidence that large numbers of people already can’t afford to top them up – leading to “disconnection by the back door”.

Winter has not even arrived yet, but there is mounting concern about low-income families being left shivering in darkness because they do not have enough money to keep the lights and heating on. Uswitch has today revealed 10,000 households a month are being pushed on to prepay.

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There are lots of sobering statistics that could be rattled off, but perhaps this one, from Citizens Advice this month, encapsulates why many campaigners are so worried: the charity has seen more people unable to top up their prepayment meter so far this year (up to the end of September) than it did in the whole of the previous three years combined.

And yet so much of what is happening already, and what is feared will happen over the winter months, could have been foreseen.

First, some basics. At the last count, about 4.5 million domestic customers use energy prepayment meters, and many of them are on low incomes. With one of these, you pay upfront for your gas or electricity. It lets you pay small amounts often, but it is more expensive than getting a bill.

Controversially, the government’s energy price guarantee (EPG) – which replaced the Ofgem price cap – is about 2% higher for prepayment customers than for those who pay by direct debit, and Labour has said it is “outrageous” that those with the least should have to pay more.

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While the EPG – which was slashed from two years to six months just over a week ago – will provide some help between now and April, there are a few things to bear in mind. One is that, even with the guarantee in place, typical bills will still be almost double what they were last winter. The second is that people with prepayment meters, who “pay as they go” for their energy, are at particular risk in the winter months because, unlike direct debit customers, they cannot spread the cost across the whole year. That could translate into £200-£300 more spent on energy just this winter. On top of that, prepayment meter households will often have the most poorly insulated homes.

If you can’t pay your energy bills, you are very unlikely to be disconnected – instead, your energy supplier will offer to put you on (or, rather, require you to have) a prepayment meter. Nowadays, that often doesn’t mean someone coming to install a piece of kit – in many cases, it means your smart meter is switched to a prepayment tariff.

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So, with a worsening cost of living crisis and energy costs skyrocketing, we were always going to see an increase in the numbers on prepay. Citizens Advice said late last month an extra 450,000 people could be switched to prepay by the end of 2022 because they have fallen into debt, and on Tuesday the Uswitch data showed numbers had risen for the first time since 2019.

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What particularly alarms campaigners about all of this is the danger of people “self-disconnecting” – basically, you can’t afford to top up. “Forcibly moving people in debt on to prepayment meters is disconnection by the back door,” Gillian Cooper, head of energy policy at Citizens Advice, told the Guardian. “If people can’t afford to top up, they’re at real risk of the heating going off and the lights going out.”

She added: “The government must bring in a winter ban on these tactics.”

Debt charity StepChange – which also wants a moratorium on the forced installation of prepayment meters at least until next April – said it was not right that people should be forced to be disconnected from their energy in this way. “You wouldn’t do it for water debt,” it said.

Ed McDonagh, the charity’s senior public policy advocate, said yet another worry was that the regulators had no means of checking the scale of self-disconnection. “It’s a kind of hidden harm. If it’s a cold winter, that harm can be considerable.”

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