Prepayment meter debt rises to £1 billion
The number of households using prepayment meters to repay debt has risen by 40% from 220,000 to 750,000 households.
And average debt balances have also grown by 40%, resulting in a 100% growth (from £500 million to £1 billion) in the amount owed by prepayment meter households.
On average, customers in debt on prepayment meters are typically 15-18 months behind, equating to around £1,300 in outstanding balances.
In early 2023, energy companies were made to stop the forced instalment of prepayment meters.
But without a prepayment meter being installed, households can continue to consume energy without paying.
Going forward, energy companies are going to have to do more to help customers at an earlier stage in the arrears process.
What are prepayment meters?
Prepayment meters are pay-as-you-go gas and electricity meters. They can be topped up online or with a card at certain shops and post offices.
About four million households get their gas and/or electricity through a prepaid meter.
They are mostly used by low-income households or those who are struggling financially as they allow you to pay for small amounts of usage as you go.
With prepayment meters, you pay for energy before you use it. So, they can help with budgeting and you’re more aware of how much you’re spending on energy.
However, if the meter isn’t topped up and runs out of credit, your supply is stopped. Tariffs on prepayment meters also tend to be more expensive and you won’t be able to take advantage of discounts for paperless billing.
Another drawback is that, unlike a monthly direct debit, prepayment customers can’t spread their payments evenly across the year, so will pay much more in the winter than the summer.
What happens if you’re in arrears with your gas and electricity?
Energy arrears are a priority debt. It’s essential you pay priority bills before other debts such as credit cards because missing or late payments could have consequences, such as having your energy disconnected or losing your home.
If you’re struggling to afford your gas and electricity bills, contact your supplier and speak to them immediately.
Working together, you’ll should be able to come up with a solution that works for both of you.
You could agree a payment plan with your supplier, so the debt is paid off in instalments.
When agreeing a payment plan, your supplier will consider:
- How much you can afford to pay
- How much energy you’ll use in the future
Before you contact you supplier, you should work out your household budget and have a reasonable understanding of what you can afford to repay. You can use our free budgeting tool to work this out.
If you can’t afford to the payment plan, you could ask your supplier if it’s possible to pause your repayments.
Fuel Direct Scheme
If you’re claiming certain benefits such as income support, universal credit, or pension credit you could opt to have your repayment taken automatically through the Fuel Direct Scheme.
To apply for the Fuel Direct Scheme you should contact the following:
The Pension Service if you’re claiming pension credit
The Jobcentre if you’re claiming any other benefit.
If you’re paying off energy debts through your benefits, you can also ask to start paying your energy bills directly from your benefits.
You should contact your energy supplier to set this up.
Grants and energy support from suppliers
If you’re in debt to your energy supplier, you might be able to get a grant or financial assistance to pay if off.
Most of the major energy supplier offer grants or extra help to customers who are struggling to afford bills.
Some offer money towards bills, while others will write off debts or move you to a cheaper tariff. What you’ll be offered will depend on your energy company and personal circumstances.
If you can’t get a grant from your supplier, you might still be able to get help from the British Gas Energy Trust. These grants are open to everyone – regardless of whether you’re a British Gas Customer or not.
But you do need to get debt advice before applying. We can help you with that.
Caroline has worked in financial communications for more than 10 years, writing content on subjects such as pensions, mortgages, loans and credit cards, as well as stockbroking and investment advice.
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