Making money from Pre-payment meters

The way in which energy firms make their profits has recently been called into question by the industry's regulator Ofgem with regard to pre-payment tariffs. Those on a low income, such as the elderly, disabled people, students, and those made redundant due to the current economic crisis, are all more likely to live in accommodation that has a pre-payment energy meter installed. Energy companies are making their biggest profits from these vulnerable and financially challenged customers according to new reports. Energy suppliers make approximately 1 billion pounds every year in extra charges from these meters and it's understood that this money allows them to offer more affluent customers lower priced deals. Some people say this is a backwards 'Robin Hood' scenario and that energy companies are 'stealing from the poor to give to the rich'.

Pre-Pay Meters

The Energy Retail Association defends the meters saying that they are popular with those on a low income because they allow them to budget better. However, once a meter runs out of immediate funds the electricity or gas runs out too, so you need to keep a meter topped up if you don't want to be cold over winter or go without hot food or electricity. In short, if you can't top up the meter (including the expensive additional charges) you can't live comfortably. It's an energy ransom.

In the region of 1,000 pre-pay metres get installed in flats and houses every day and the main reason, according to Consumer Focus, is people falling behind on their energy bills. When people fall behind on gas or electricity bills the companies force customers to have the special meters fitted.

Experts at the Citizen's Advice Bureau (CAB) say that this practice is 'against the company's own rules.' In fact, a Social Policy officer for the CAB has said, "These people have built up debt, but they are not being offered a range of payment methods and they're not being offered affordable repayment rates, they're being pushed onto pre-payment meters."

News about the meters hit the headlines recently because a woman got home from holiday to find that an energy company had actually broken in to her home in order to fit a meter. The woman who lived in North London had gone on holiday and when she returned she discovered that E.ON had a court warrant in order to remove the locks and enter her home to fit a pre-pay meter.

The matter was later resolved when it was revealed that the woman had in fact been paying EDF in error for 6 years due to the similarity in their names and E.ON refunded her 6 years of payments which she then used to settle E.ON's outstanding accounts. However, this highlights the lengths that energy companies will go to in order to fit pre-payment meters.

Connection with Debt

Not all people who have pre-pay meters installed are in debt, many of them exist in properties such as flats with short tenancy agreements and ex-council homes and they are rarely replaced with a cheaper direct debit plan. What's more, some energy companies also charge £50 to switch from a pre-pay meter to direct debit payments, which could be seen as a financial deterrent.