Prepayment Meters — a quick report October 2022
Background
Research into the proportion of people paying for their energy via prepayment meters, also covering how many customers are repaying a debt via prepayment meter and an overview of energy debt, disconnections and excess deaths due to cold homes.
Prepayment meter usage
In 2017, there were 3,198,816 prepayment electricity meters in operation in Great Britain.
Across Greater Manchester, this figure was 148,086 — a further breakdown can be produced by postcode using the Gov Electric-Prepayment-Statistics (see sources at the end).
Bolton 13833
Bury 7705
Manchester 41168
Oldham 12231
Rochdale 13032
Salford 16486
Stockport 9631
Tameside 12893
Trafford 7188
This rose to around 4.4 million electricity and 3.4 million gas customers on a PPM in 2018.
The total number of force-fitted PPMs installed under warrant has decreased overall from 84,424 in 2017 to 70,981 in 2018. The number of smart meters remotely switched from credit to prepayment to repay debt has increased significantly. Just under 70,000 smart meters were remotely switched from credit to PPM in order to repay a debt in 2018 compared to the 21,000 in 2017.
The cheapest tariffs per annum across all suppliers are £1,872, £1,969 and £2,015 respectively for direct debit, standard credit and prepayment. (Source: Ofgem Data Portal)
Number of customers repaying debt
The number of domestic customers repaying a debt to their supplier at the end of Q2 2022 has continued to rise compared to the previous quarter for both electricity and gas accounts (41% and 45% respectively). The total number increased to 1,450,771 for electricity (5.0% of all customers) and 1,139,469 for gas (4.7% of all customers). (Source: Ofgem Data Portal)
Proportion of customers repaying debt via prepayment meter
In the last year the proportion of customers repaying electricity debt through a PPM has dropped to a record low of 21% for Q2 22. For gas customers in debt, Q2 2022 has dropped to 25% also being a record low. (Source: Ofgem Data Portal)
Average Debt Levels where there is no arrangement to pay
Currently £979 for electricity and £767 for Gas in Q2 2022. There has been a small decrease between Q1 and Q2 2022 (from £1000 and £855 respectively), however, the current level of average arrears represents a 17% increase for electricity and 16% increase for gas compared to the previous year (Q2 2021). (Source: Ofgem Data Portal)
Number of accounts in debt with no arrangement to pay (i.e., potentially susceptible to forced prepayment meter installation)
Customers in arrears are customers who owe a debt to their supplier, but do not yet have a debt repayment arrangement in place. In Q2 2022, the number of customers in arrears increased by 2% and 7% from the previous quarter in electricity and gas respectively, to 896,740 (3.1% of customers) in electricity and to 719,116 (3.0%) in gas.
These are accounts that have had a bill issued which remains unpaid for longer than 91 days/13 weeks where a formal arrangement to repay the debt has not been agreed.
Total in debt with/without arrangements to pay
Putting together the two figures above, gives a current picture of indebtedness:
Customers in electricity debt: 2,347,511
Customers in gas debt: 1,858,585
Number of disconnections due to energy debt
A slight increase from Q1 2022 in the number of domestic customers disconnected for debt, 3 electricity and 1 gas disconnections were recorded in Q2 2022. During the whole of 2021, there were 21 disconnections for non-payment of debt in electricity and no disconnections in gas. Overall, disconnection of customers for debt is still very rare.
Protections already in place for vulnerable customers
During winter (October to March), suppliers are prohibited from knowingly disconnecting customers of pensionable age (where they live alone, with other pensioners or with children). Suppliers must also take all reasonable steps during winter to avoid disconnecting premises where the occupants include a person who has a disability or a chronic sickness or a person of pensionable age.
Members of Energy UK also adhere to a voluntary code of practice known as the ‘Safety Net’. Among other protections, signatories have committed to not disconnecting customers in vulnerable* situations at any time of year and to reconnecting customers who are subsequently identified as vulnerable as a priority and usually within 24 hours.
*“A customer is vulnerable if for reasons of age, health, disability or severe financial insecurity, they are unable to safeguard their personal welfare or the personal welfare of other members of the household”
All suppliers with customers on smart prepayment meters offer emergency credit. Most offer £5 or £10 and the customer pays this back the next time they top up. All suppliers that offer smart prepayment provide ‘friendly’ credit during evenings/night-time, weekends and bank holidays (which allows a customer to have a continuous supply).
Why should we be worried?
In 2019, Ofgem reported in their State of the Energy Market annual report that:
14% — The proportion of prepayment meter customers who reported having self-disconnected in 2018 (2017 was 10%)
16,500 — The number of excess winter deaths that can be linked to people living in cold homes in winter 2017–18.
This relates to a period when average dual-fuel energy bills for a typical consumer with one of the large suppliers was £1,184 per annum. In 2017 the average was £1,117.
Ofgem calculates the bill values associated with the different tariff types using a ‘typical domestic consumer’ with ‘medium’ energy use. Since April 2020, typical consumption values for a medium consumer are 12,000kWh/year for gas and 2,900kWh/year for electricity.
The ‘mean consumption’ of electricity via prepayment meters in 2017 was 3580 kWh
Standing charges
Average standing charges for customers on default tariffs will remain capped in line with the levels set (in Great Britain) by Ofgem for the default tariff cap from 1 October 2022, at 46p per day for electricity and 28p per day for gas, for a typical dual fuel customer paying by direct debit.
£167.90 electricity per annum
£102.20 gas per annum
Unit price caps (SVT)
Electricity — 34.0p/kWh
Gas — 10.3p/kWH
Therefore, an estimate of a ‘typical domestic customer’s average bill based on ‘medium’ use (as above) in winter 2022 is:
£986.00 electricity + £167.90 standing charge = £1,153.90 per annum
£1,236.00 gas + £102.20 standing charge = £1,338.20 per annum
Average dual fuel bill based on these estimates is £2,492.10 (prepayment estimate is £2560)
At less than half of this amount in 2018, 14% of prepayment customers self-disconnected and there were an estimated 16,500 excess winter deaths attributed to cold homes.
Citizens Advice research found that those who self-disconnected cited negative physical impacts of feeling cold, having a dark home and being unable to wash and emotional impacts of financial stress, stress from the practicalities of topping up as well as feelings of shame and embarrassment.
The National Institute for Health Care Excellence found a strong relationship between a higher number of deaths and people who fell ill due to cold homes and factors such as age, disability and deprivation.
Conclusion
Extrapolating data from 2018 to 2022, based on around 4.3 million electricity prepayment customers, a 14% self-disconnection rate produces an estimate of 602,000 homes self-disconnecting.
The average bill has increased by 111% since 2018. Extrapolating this increase to self-disconnection predicts a figure of 29.5% of households self-disconnecting (1,268,500 homes), with a much higher number of households self-rationing (both prepayment and credit meter customers).
Unfortunately, if we see a similar percentage increase to excess winter deaths attributed to cold homes, we could be looking at over 34,000 avoidable deaths.
Sources
Ofgem — Vulnerable Consumers in the Energy Market 2019
Energy UK — Additional Support by company
Gov — Electric prepayment statistics
Gov — Energy Bills Support Factsheet
Citizens Advice — Self-disconnection report 2018
National Institute for Health and Care Excellence (2016) https://www.nice.org.uk/guidance/qs117
