In amongst all the hoo ha of the last few weeks, about rising energy bills and Big Six profiteering – we’ve frequently heard about people who struggle to pay their energy bills, lower income households, the fuel poor.
Sometimes in the context of what Cameron calls ‘green levies’ – the social elements of that melting pot being the ECO scheme (insulation for lower income homes) and the Warm Home Discount (lower bills for older people). We’ve also heard how 30k people are expected to die this winter due to being unable to afford to heat their homes. And of course politicians of all hues have professed their concern for that and the affordability of energy more generally, which impacts most on the less well off among us.
The Big Six have social obligations in this regard, which require them to spend considerable sums each year – though this week the key one, ECO, was watered down (cut in half) and the Warm Homes one seems destined to move into general taxation.
But on the other hand, they appear to have been ripping off those same households – well at least any of them that use a Pre Payment Meter (which I think will be most of them).
There are some four million homes in Britain with a Pre Payment Meter (PPM) for electricity and three million for gas. And they pay the highest prices for their energy of anyone in this country – on average 6% or £80 per year more, for dual fuel, than a customer paying by Direct Debit.
As I began to write this we had only researched the Big Six, when we looked into the independent sector it was actually worse (though on smaller customer numbers). Many independent suppliers also charge a premium for PPM customers.
Rather shockingly, because they come with the expectation of greater ethics – the Co-op is the worst of all, big or small suppliers. They charge three times as much as the Big Six do – some £250 a year for a dual fuel customer. That’s a staggering 20% premium for a pre payment customer.
There’s no justification for any of this.
Pre Payment Meter customers do cost a little more to provide service for, but this is offset by the fact that they pay for their energy up front – they are in that respect the best payers in the energy market, but are treated as the worst.
The combined extra cost that these people (who struggle to pay energy bills) are paying to the Big Six is about £350 million a year – over and above what Direct Debit customers are paying. I think that’s a rip off and actually increases fuel poverty.
How many households would come out of the definition of fuel poverty (where 10% of disposable income is spent on energy bills) – if they had access to energy at the same price as most of the rest of us?
One of the biggest things this or the next government could do to alleviate fuel poverty is to end this practice – to forbid energy companies from discriminating against Pre Payment Meter customers in this way.
It can be done – Ecotricity does it already. And so does EBICO.
We have just one tariff to keep things simple and all of our customers pay the same price – no matter when they joined us or how they pay.
It’s an ethical approach to pricing. We need more of that in the world of Energy.