Concern over dearth of tariffs for PPM customers

Pre-payment meter (PPM) customers are facing wide price differentials compared to those on standard credit meters due to a lack of switchable tariffs, new research has found.

The research, published by Comparethemarket.com, found more than 4 million PPM customers are overpaying on their energy bills by an average of £94 a year. Nationwide, this equates to a combined overpayment of more than £389 million annually.

The comparison service says there are 283 tariffs currently available for non-prepayment customers but just four fixed PPM tariffs for customers to switch to. Likewise, for PPM customers there are only 45 variable tariffs available compared to 91 for customer on an SVT with a standard credit meter.

Previous analysis by the service found that lower-income households spend, on average, £60 more every year on their energy bills than higher-income customers. This is due in part to those on lower pay being more likely to be on an standard variable tariff (SVT) and not switch provider.

The research found that almost two-thirds  (64 per cent) of PPM customers are on a supplier’s SVT with the average annual cost at £1,195 – £39 more than a non-PPM SVT. The difference is equally pronounced when comparing a fixed-term prepayment meter tariff with a non-prepayment meter fixed tariff, with the prepayment meter being on average £33 more expensive a year.

As well as greater annual savings for customers on a standard credit meter, the propensity of these customers to switch providers is higher; only 32 per cent of standard credit meter customers are on a typically more expensive SVT.

The annual difference in price between the average PPM customer on an SVT versus a customer with a standard credit meter on a fixed term tariff is £219 per year. When compared to the cheapest fixed credit meter tariff on the market, the cost difference is currently £431 per year.

Speaking to Utility Week, Matt Cole, chair of the Fuel Bank Foundation charity, who previously served as Npower’s head of policy and customer vulnerability, explained that while a wider range of tariffs is a good thing in a competitive market, the costs to a supplier of providing a PPM top up network are higher than for those who pay by direct debit, for example.

“Levelling these would require an acceptance of a greater level of cross subsidy”, he added.

Furthermore, he highlighted how Fuel Bank Foundation clients face the problem of having no money for fuel and food, as well as other basics.

“In honesty a 10, 15, 25 per cent reduction in annual bill value wouldn’t necessarily solve the problem of not having enough cash to top up today.”

Peter Earl, head of energy at Comparethemarket.com, said: “A lack of competition in the prepayment meter market is likely a factor in these customers being offered poorer value deals in comparison to the majority of UK energy customers on standard credit meters.

“With limited options available, it would not be surprising if prepayment meter customers are deterred from switching supplier to secure a better deal. Encouragingly, many energy suppliers will remove a prepayment meter free of charge for a customer who wants to switch to a standard credit meter.”