Forced installations of prepayment meters have been widely condemned but the fact that prepayment customers pay significantly more than other energy consumers has attracted far less attention.
Prepay customers pay more simply because their standing charges are so high, now £350 p.a. for gas and electricity combined, which is £50 p.a. more than those who pay by direct debit.
Most prepayment customers are on low incomes so spend less on energy. Their higher standing charges further reduce the amount of energy they can afford, with many self-disconnecting from their energy supply.
The government has announced that it will spend £200 million of tax-payers’ money to take the edge off this for nine months from July but the higher standing charges are the explicit result of a series of policy decisions by the energy regulator Ofgem. Ofgem has consistently favoured the energy companies over the most vulnerable consumers.
Standing charges should be much lower for all consumers, and particularly prepayment customers, because they substantially exceed the costs that should be recovered through them, as Ofgem’s own analysis shows.
High standing charges contributed to the energy crisis by encouraging the entry of firms that were more intent on capturing these payments than on managing their energy costs effectively.
Ofgem’s policy of reducing the unit rate rather than the standing charge has also increased overall demand for energy, exacerbating carbon emissions and reducing the U.K.’s energy security.
Download the report commissioned from Ideal Economics by National Energy Action: