New research has shown that typically vulnerable households using prepayment meters to pay for their energy are among the least likely to change providers, leaving them continually worse off.
The research comes from leading price comparison website Money Expert, who conducted a survey of energy users across the UK, to find out what they knew about what they were paying.
According to Ofgem, there are around four million households in the UK currently using prepayment meters for their gas or electricity. A large number of these households have been forced onto prepayment plans, often due to non-payment of previous energy debts. Households with prepayment meters are typically among the most vulnerable financially, and among the most likely to end up in fuel poverty. As such it is particularly important that these households are not being overcharged and are provided with as much opportunity as possible to get themselves in a better position.
Ofgem introduced a cap to the amount that a supplier could charge a household with a prepayment meter in April this year. This was in response to findings that showed that even the cheapest prepayment plans can come in at an annual cost that is between £260 and £320 higher than direct debit equivalents. Even with these caps, prepayment plans are costly, and Money Experts’ research shows that despite this, people on these plans are the least likely to actually try and switch provider.
Only 13% of households with prepayment meters switched provider in the last year, compared with 22% of those who pay for their energy monthly. 25% of prepayment customers have never switched at all, while just 19% of monthly payers haven’t.
Part of the problem, it seems, is a lack of knowledge and understanding. 45% of prepayment meter users simply didn’t understand how their energy tariffs were calculated – 8% more than among monthly bill payers. There also seemed to be a widespread lack of knowledge about the various factors that impact on the cost of a tariff – 64% didn’t know that the region they lived in affected the cost, and nearly 20% didn’t know that the particular tariff they were on did either.
Just under a fifth of prepayment customers thought that the fact that they had a prepayment meter meant that they couldn’t switch, Money Expert found, and even more didn’t know that they would be able to save money if they did switch. Further, around 19% felt that the switching process would be too complicated and so avoided it altogether, despite “it being an easy process handled through face-to-face support, on the phone or online,” Money Expert explain.
Mike Rowe, Chief Operations Officer at the price comparison site explained: “There is an obvious need for increased support to help people with prepayment meters switch energy provider. The Government should be doing everything it can to highlight how this vulnerable sector can save large amounts of money by changing provider, which is a really easy process that can be handled face to face. People across the country could save millions simply by taking fifteen minutes to see if there is a better power deal available.”
