Energy crisis sees reversal of long-term decline in PPMs

Soaring energy costs have resulted in a reverse in the long-term trend of falling numbers of customers on prepayment meters (PPMs), new research has found.

Comparison service Uswitch.com submitted a Freedom of Information request to energy regulator Ofgem to obtain the numbers of customers on a PPM.

Customers who struggle paying their energy bills can be placed on a PPM by their supplier, meaning they have to top up their meter rather than pay a monthly direct debit.

These meters cost more to run, however, meaning customers face around £50 more a year in standing charges compared to an equivalent direct debit customer. This is due to the cost of the extra infrastructure needed to accept payments.

Furthermore, the pay-as-you-go nature of PPMs means that customers who cannot afford their energy end up self-disconnecting. Even if they do not top up their meter for a period of time, they still have to pay the accrued standing charge when they eventually do which can result in no funds left to pay for their actual energy usage.

The FOI submitted by Uswtich revealed that from the middle of 2019, the number of PPMs dropped for nine consecutive quarters – falling from 7.8 million in Q2 of that year to 7.32 million in Q3 2021.

Yet the number of PPMs subsequently rose to 7.35 million in Q4 2021, and again to 7.38 million in the first quarter of 2022 – an increase of 60,000 in six months.

Uswitch said that if the current rate of increase continues, another 30,000 gas and electricity meters will be moved to prepay in Q4 this year.

The company’s director of regulation, Richard Neudegg, told Utility Week it is unclear why there was a decline in the number of prepayment meters prior to the recent uptick but said it could be because it is easier for customers on the growing number of smart meters to switch from prepayment to credit.

Neudegg said the “worrying reversal” of the previous trend has left more households at risk of self-disconnection this winter: “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.

“Families and individuals on pre-payment meters will be plunged into darkness as they self-disconnect when they can’t afford to top up.

“We want the government to ensure that vulnerable consumers on prepayment meters are considered the higher priority for additional support beyond April 2023 when the Energy Price Guarantee changes.”

In response, a spokesperson for the Department for Business, Energy and Industrial Strategy said the Energy Price Guarantee will save the typical household around £700 this winter, based on what energy prices would have been under the current price cap – reducing bills by roughly a third.

This, they said, comes in addition to £1,200 direct payments to vulnerable households.

“A Treasury-led review will consider how to support households from April 2023, focusing support for those in need while reducing costs for the taxpayer,” they added.

Support for customers in the face of rising energy bills will be one of the key discussion points at Utility Week Forum on 8-9 November in London. Find out more here.