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Prepayment energy households overpaying by £94 a year

As many as 4.1 million energy customers are paying more than necessary on standard variable prepayment meter rates.

Tom Harrison
Content writer
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Posted 3 JUNE 2020

Over four million UK energy customers are overpaying to the tune of £389 million a year, due to less-than-competitive prepayment meter tariffs.

“Hugely concerning” price disparities uncovered by comparethemarket.com point to households shelling out £94 more on average than they would on a standard credit meter.

Fixed or variable rate?

Pre-paid energy is traditionally a more popular option among people who’ve had problems paying their energy bills in the past, as it helps them better keep track of what they’re spending.

Like standard tariffs, those for prepayment meters can be either fixed or variable. But with just four fixed tariff deals available – compared to 283 options for those using standard credit meters – it seems households are severely limited in their selection.

Research shows a huge 64% of prepayment customers are on a supplier’s standard variable tariff (SVT), at an average yearly cost of £1,195 – a significant £39 more than with a typical non-prepayment SVT.

A similar disparity of £33 was found between the fixed-term tariffs of regular and prepayment meters.

Combined with the £60 average additional spend on energy by lower income households – trapped on an SVT and unlikely to switch provider – this overspend figure soon escalates.

In fact, the annual price difference between the average prepayment 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, this quickly jumps to a startling £431 a year.

Lack of competition

Peter Earl, head of energy at comparethemarket.com, said:
“It is hugely concerning that prepayment meter customers – some of whom are undoubtedly classed as vulnerable – are paying considerably more for their energy on average than those on a standard credit meter.

“According to the latest government fuel poverty statistics, over two million households are living in fuel poverty. British Gas’s swift reversal of its decision to only allow top-up of its prepayment meters by a minimum of £5 earlier in the year underlines how far consumers struggling to make ends meet must make each pound go.

“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.”

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