Nearly 300,000 Households on prepayment meters face debt trap headed into Winter

Brand new data obtained by Debt Help website DebtBuffer.com via a Freedom of Information request to Ofgem reveals the dire situation faced by almost 300,000 UK households.

  • 299,720 households have prepayment electricity meters set to repay debt in Q1 2022
  • 298,746 households have prepayment gas meters set to repay debt in Q1 2022
  • Since Q1 2019, the number of prepayment electricity meters set to repay debt has risen by 30%
  • Since Q1 2019, the number of prepayment gas meters set to repay debt has increased by 43%
  • Prepayment customers who fall into arrears on their agreed weekly debt payments or use “emergency credit” face 100% of electricity top-ups & up to 90% of gas top-ups being used to repay these arrears before they can heat their homes.

This new data reveals hundreds of thousands of struggling UK households are facing a bleak winter situation where the cocktail of higher energy prices, combined with any arrears automatically deducted from whatever they can afford to top-up, will leave them with even less money for their energy needs and a spiral of debt many will find it difficult to escape. 

DebtBuffer submitted a FOI request to Ofgem to specifically ask about arrears faced by Prepayment Meter (PPM) customers between Q1 2019 and Q1 2022. 

Further more, DebtBuffer has also investigated how each of the most popular energy suppliers in the UK charge their PPM customers to claw back emergency credit and repayment arrears.

The results are shocking.

Why is this an issue?

Apart from the extremely large and increasing numbers of households going onto, and having prepayment meters set to repay debt, it’s important to understand what happens in this scenario:

Where PPM customers have their meters set to collect debts, this sum is collected by an agreed weekly payment that is paid via the customers meter. This debt repayment is separate from any standing charges, emergency credit usage and any credit applied by customers for their ongoing day to day usage.

The issue is, that when a customer falls behind on this agreed weekly payment, and/or runs out of credit and has to use any “emergency” credit that suppliers are obliged to provide (eg customer runs out of credit at night, on weekend or bank holiday when shops are closed and credit cannot be purchased), any credit they make to their meter has a unreasonably high percentage used to pay back these arrears, before any credit can be spent on energy usage! 

Heather Rose, Head of Debt Help at DebtBuffer says “The data we have uncovered from Ofgem would be a stark enough warning of the problems to come on their own. However, couple that with our research that shows some energy providers are clawing back up to 90% of gas top-up payments from the most vulnerable customers, who fall further into arrears or need to fall back on emergency credit usage, we have the bleak prospect of these households simply being unable to use what little money they have, for keeping their energy switched on over this winter period. For anyone to say there is free money being made available to the most vulnerable this winter in the form of emergency credit, would be grossly misleading. These emergency credits need to be paid back in full, before supply can be restored.”

What does the Ofgem data show?

The data provided by Ofgem to DebtBuffer is explained by Ofgem “we only hold the information on the total number of Prepayment Meter (PPM) customers who have their PPMs set to collect payments towards a debt. This is predominantly a reflection of customers switching from credit to PPM in order to repay a debt.

Additionally, Ofgem said  “These figures refer to all PPM customers who are repaying a debt through their PPM, regardless of the estimated length of the recovery period. This refers to PPM customers making a regular debt repayment through their PPM, it does not include customers for whom credit has been added at installation of the PPM to allow the customer time to purchase credit. They are ‘snapshot’ figures, recorded on the last calendar day of each quarter.”

QuarterYearElectricityGas
Q12019229,181208,435
Q22019270,360226,869
Q32019282,945218,923
Q42019273,521225,767
Q12020273,286232,951
Q22020254,379208,590
Q32020276,458194,865
Q42020248,691218,590
Q12021271,045226,096
Q22021267,990239,452
Q32021264,900239,984
Q42021293,248240,899
Q12022299,720298,746

Summary Q1 Data Analysis:

Q1 Year on Year Analysis
QuarterYearElectricityGasGas Change YOYGas Change YOY%Elec Change YOYElec Change YOY%
Q12019229,181208,43500.0000.00
Q12020273,286232,95124,51611.7644,10519.24
Q12021271,045226,096-6,855-2.94-2,241-0.82
Q12022299,720298,74672,65032.1328,67510.58
Q1 2019 vs Q1 2022
QuarterYearElectricityGasGas Change YOYGas Change YOY%Elec Change YOYElec Change YOY%
Q12019229,181208,4350000
Q12022299,720298,74690,31143.3370,53930.78

The data shows that there has been a 43% jump in Gas PPM customers having their meters set to repay debts between Q1 2019 and Q1 2022. For the same period with Electicity PPM customers, the jump is 30%.

We decided to draw the comparison between Q1 2022 with Q1 2019 rather than Q1 2020 because both lockdown and Government furlough and financial support schemes due to COVID19 were introduced in Q1 2020.

Heather Rose from DebtBuffer commented “throughout the whole of 2021, the number of customers repaying gas debts has risen every quarter. Unsurprisingly this data carries on into Q1 2022 and unfortunately we expect it to rise at a far higher rate into this year. What we are starting to see here is not just a reflection of the rising energy prices, but also that the energy companies are increasingly making use of court warrants for force customers who were on monthly direct debits, onto prepayment meters where these meters are then set to recover their debts in weekly payments. This year alone energy companies have been granted 187,000 warrants to forcibly install prepayment meters in households. The data we have for 2022 from Ofgem lags behind the current real-world situation and will only increase.”

How much do energy suppliers take from PPM customers in debt?

DebtBuffer analysed the most popular energy suppliers websites to uncover how much debt they claw back from customers when they fall into arrears on their agreed weekly payments or if they have to use emergency credit to keep their supply connected. These percentages are what is deducted immediately from any top-up credit, BEFORE any funds are available to be spent by the customer on energy usage.

% of credit taken per topup if there is debt registering on a prepayment meter
SupplierGasElectricity
British Gas90%100%
EDF Energy70%100%
Octopus Energy70%100%
ScottishPower70%100%
SSE Energy Services70%100%
E.ON Energy70%100%
Bulb Energy30%100%

Here is a real world example for how British Gas explains repaying debt through prepayment meters:

Gas Prepayment Meters: “If you don’t top up enough to pay us back, don’t worry, we won’t leave you without any gas or electricity. When you top up, we’ll take 90% to pay towards your debt and leave 10% for your gas. For example, if your agreed weekly amount is £10 and you top up £10, we’ll put £9 towards your debt and leave you £1 for gas. You’ll still owe us £1, which we’ll take next time you top up that week.”

Electricity Prepayment Meters: “If you don’t top up enough to pay us back your meter will display the total of everything it couldn’t take on-screen. When you next top up, it’ll take that amount first to pay towards your debt before it can be used for electricity” 

Heather Rose from DebtBuffer said “This analysis shows how incredibly harsh prepayment meters can be for customers who end up falling into arrears on any agreed weekly payments for debts, or, get into additional debt by having to make regular use of emergency credit. To automatically deduct 100% of any electricity arrears and up to 90% of any gas arrears, before any credit can be used to heat or power households is simply not good enough, in fact, it borders on callous. According to Ofgem data, the average repayment term for PPM customers, with meters set to recover debt, is 247 weeks. Ofgem needs to take firm action to prevent these impacted households being in a permanent debt spiral because of these high claw backs, and being totally unable to afford energy.” 

How much are standing charges for prepayment meter customers?

Standing charges tend to be pricier than monthly payment tariffs, since installing and maintaining meters costs energy suppliers money. If there’s no credit on your prepayment meter, those daily charges continue to rack up, so you may find some or all of the first money you put in goes towards paying what you owe in standing charges. Prepayment customers are typically charged around 50p a day in standing charges for electricity, and 37p for gas but, again, this will depend on your supplier and where you live.

Are prepayment meter rates more expensive?

With a prepayment meter, you’ll pay more than you would on the best direct debit deal. As of May 25 2022, based on calculations from Ofgem for medium usage, the Prepay energy price cap on typical use was £2017. The standard meter price cap was £1971. This works out as 2.33% more expensive.

Are energy companies putting more people onto prepayment meters?

Energy customers forcing people onto prepayment meters is a frighteningly common occurrence and it is supposed to be a matter of last resort. The Big Issue found that between January and June of this year, more than 187,000 warrants were granted to energy companies to install prepayment meters in homes and businesses in arrears. Between April and May, when the first bills came through following the energy price cap rise of more than 50 per cent, approved applications for warrants shot up by 23 per cent, from 27,389 in April to 33,774 in May. May also saw a higher number of applications granted than in the previous year, where 27,174 were approved by courts in England and Wales. That’s a 24 per cent increase. As well as paying more for energy on a prepayment meter, those who have them forcibly installed can also find themselves liable for the costs of installation, capped by Ofgem at £150. This cost is usually added to the amount they already owe.

Tackling Priority debts first & avoiding a prepayment meter at all costs if possible

Heather Rose from DebtBuffer says “for customers that are still on a monthly direct debit but are finding themselves in payment difficulties with their energy bills, or for when the prices rise, won’t be able to afford them, you will need to break all your outgoings down into those that are priority payments or debts and those that are not. Priority bills are ones that typically have severe consequences if you fail to pay or fall behind. Eg rent, mortgage, utility bills and council tax. Anyone in this situation should absolutely talk to their energy providers early and make arrangements to pay and ensure you are not moved onto a prepayment meter. We are urging people to ignore any calls for non payment of bills or mass social media promoted boycotts you might see. That will be the fastest way to a Default on your credit file, followed by court action with a CCJ (county court judgement) for payment, which means Bailiffs at your door and also court action to forcibly install a prepayment meter.”

/ends.

About DebtBuffer:

Started in 2020, DebtBuffer helps thousands of people every month to find the help they need for a way out of problem debt. DebtBuffer is on a mission to provide consumers with information to help them make informed choices about their financial future. We’re here to show people the truth about the financial marketplace and show them, no matter what their individual circumstances, there is help available and a way out of debt. DebtBuffer is also a champion of consumer rights and fight for the fair treatment of people in debt. 

Freedom of Information Request data: The PDF response from Ofgem to our FOI request is available to Journalists upon request. Please ask.

Energy Meter usage sources: 

https://www.britishgas.co.uk/help-and-support/struggling-to-pay/paying-us-back-through-your-pay-as-you-go-meter

https://www.edfenergy.com/for-home/help-centre/faq/meters?steps=23147-23141#chapter-23138-3

https://octopus.energy/help-and-faqs/articles/where-has-my-top-up-gone/

https://community.scottishpower.co.uk/t5/Pay-as-you-go/Prepayment-Questions/ta-p/69#onefaq

https://sse.co.uk/v3/assets/blt09078e271abddd45/blt57b353665334b963/6152df2677d06a0c98360767/energy-gas-pay-as-you-go-meter-guide.pdf.pdf

https://www.eonnext.com/prepayment

https://help.bulb.co.uk/hc/en-us/articles/360019944871-Repaying-debt-on-your-gas-top-up-prepay-meter

https://sse.co.uk/v3/assets/blt09078e271abddd45/blt3d06a59718aab7cd/6152df84564bf37c154fa80f/energy-electricity-pay-as-you-go-meter-guide.pdf.pdf

https://help.bulb.co.uk/hc/en-us/articles/360040812172-Repaying-debt-on-your-electricity-top-up-prepay-meter

Usage Rights & Credit:

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