Energy Company Charges

Yvonne Fovargue Excerpts

Tuesday 4th February 2014 Commons Chamber

[Yvonne Fovargue (Makerfield) (Lab)]

I, too, congratulate the hon. Member for Harlow (Robert Halfon) and all the Members who have supported this important debate.

We are all paying a lot more for our energy. As the hon. Gentleman mentioned, energy prices have increased eight times faster than earnings since 2010. It affects us all but impacts on lower-income households far more, not just because they have less to spend generally, meaning that any rise in the price of everyday goods and services hits them harder, but because they pay more than better-off households for their heating and power—many poorer households pay for their light and heating using prepayment meters. That is the area on which I want to concentrate.

People with prepayment meters have more expensive tariffs than direct debit customers. Citizens Advice calculates that meters add £100 a year to the average bill, which is a lot of money for someone on a low income already stretched by the rising prices of other household essentials. It is no wonder, then, that StepChange debt charity has recorded a 129% rise, between 2010 and 2013, in the number of clients in electricity arrears and a 114% rise in gas arrears.

We can all understand why energy companies want customers to pay their bills by direct debit—it is easier for them and cheaper—and many of us do pay that way, but 45% of households do not, according to Which?. In fact, more than 7 million people in the UK pay for their gas and electricity by prepayment meter, and that figure has been rising in recent years. It is not right that less well-off families are being penalised for using this payment method. There are many reasons households choose not to pay by direct debit: they might not have a bank account; they might be wary of falling into arrears; they might have been put on a meter by the energy company for past arrears; or they might simply have inherited the meter from a past tenant in their flat or house.

[Stephen Twigg (Liverpool, West Derby) (Lab/Co-op)]

My hon. Friend is making a powerful case about prepayment meters. I have been contacted by a constituent who wants to get off her prepayment meter. She has just been made redundant and is facing a big cost of living crisis in her own life, but to come off the meter will cost her £195, because Scottish Power charges £45 for a home visit by an inspector and then expects her to come up with a further £150 for a credit check. She will get that back if she passes, but she is still expected to find £195 just to come off the prepayment meter, which she wants to do to reduce her energy costs. Is that not another example of how these charges are a penalty on the poorest?

[Yvonne Fovargue]

I quite agree with my hon. Friend. Indeed, I was coming to that very point. The company I spoke to charges £50 for removal, or a deposit, and as my hon. Friend says, a credit check is payable by the person who wants to change their meter.

The other issue is that many people on prepayment meters are not aware of the tariff they are on, particularly if they moved into the accommodation with the meter already in place. In a recent survey by Stratford-upon-Avon citizens advice bureau, only 7% of gas users surveyed and 12% of electricity users knew the name of their supplier and the tariff they were on. This state of affairs is not helped by the fact that prepayment users receive only an annual statement. They do not receive quarterly statements. They receive an annual statement, which makes it impossible for them to monitor their expenditure, their deductions and their energy use on a regular basis. Crucially, many do not know that in addition to the energy cost, they are having a daily standing charge deducted from what they pay. Many people believe that all the money they put in goes to fuel, but if they try to economise in the warmer weather by not topping up their card, they easily build up arrears of the standing charge, and that plays havoc with the household budget.

The situation is made worse by emergency credit, which is often accessed by pressing the special button on the meter. In the Stratford-upon-Avon survey 67% of people used emergency credit in colder weather, but most did not realise that the deduction for the standing charges and arrears cease when they go on emergency credit, and are then taken off when they next top up. I have seen people at the citizens advice bureau who have topped up £10 but have had almost £5 of that go on their standing charge. That plays havoc with the household bills. If the money cannot be found, the prepayment user is left without light, heating or cooking facilities. In the Stratford-upon-Avon survey 30% of the clients who answered the survey had a long-term limiting health condition. These are the people we are leaving without heat, light or cooking facilities.

Prepayment meters are often presented as an effective budgeting tool for low-income households, and—this sounds quite benign—people self-disconnect. But they do not self-disconnect: they simply do not have the money to top up or they cannot get to the shop to do it. The reality is that the meters themselves are contributing to the increased debt problem. The highest fuel poverty rate by payment method is among households that pay for their fuel using a prepayment meter.

Energy companies need to stop discriminating against prepayment meter users and accept that there are good reasons why people are reluctant or unable to pay by direct debit. They need to ensure that prepayment meter customers have access to and knowledge of the various tariffs on offer, and that they get the best energy deals. There is a lot of talk about consumer choice, but for many on prepayment meters there is often no choice, unless the choice is between eating or heating. The energy companies need to respect their prepayment clients—they are customers, after all—and ensure that they have real control over their expenditure and energy use.