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Steep charges for gas and electricity paid by pre-payment meter customers are resulting in Dickensian living conditions for some families, a report claimed today.
Transact, a consortium of debt advice agencies, housing associations and credit unions, said its members were reporting serious levels of hardship associated with high pre-payment meter bills of up to £60 a week.
Pre-payment customers, who are often among those on the lowest incomes, are charged an average of £215 a year more for their energy bills than someone paying by direct debit, the consortium said.
"If you pay your bills in advance in most industries you don't pay more than other customers," said Transact's Christine Quigley. "Pre-payment meters are a good way for many people to pay – we just don't see why those people should be penalised."
Some families are pouring money into the meters in an effort to stay warm, said the group, while others are cutting themselves off and using bedding and extra clothing to stay warm.
Pre-payment customer Lynn Farrell and her partner and three children had to abandon their Liverpool home on Christmas Day after spiralling heating costs meant they could not afford to keep warm.
"The amount we are paying has doubled in six months and we've had to cut back on heating all winter," said Farrell. "I just can't afford to keep the meter topped up."
Ofgem, the energy regulator, is in the middle of a six-week consultation on proposals to introduce new rules for energy suppliers to address unfair pricing.
It is looking at introducing an explicit obligation in an energy company's supply licence that payment methods would have to reflect the costs associated with them. Last month it said more than £300m had been taken off the premiums paid by customers, including pre-payment meter users, following an earlier investigation when it found these prices were too high.
In November, British Gas announced a £22 a year price cut for dual fuel pre-payment customers, while Scottish and Southern also reduced pre-payment bills. However, even after the changes – and the latest round of price cuts announced last week – British Gas duel fuel customers on pre-payment meters will still pay on average £65 a year more than those paying by direct debit.
In December, npower announced that its pre-payment meter customers would see a reduction in their bills of around £30 a year as it realigned its prices with those customers who pay quarterly by cash or cheque. It did the same for electricity customers in August.
But Ofgem is concerned energy companies are not making big enough cuts fast enough, which is why it launched its latest consultation. "We must win a fair market with no extra charges for pre-payment users," said Jim Cousins MP of the Parliamentary Warm Homes Group.
"That means no extra charge for having them, and no extra charge for using them."
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