While most households are preparing to face a difficult winter, it will be the 4.5 million families who pay for their energy using a pre-payment meter who could suffer the most.
Families using prepayment meters - where they pay for their energy before they use it by topping up with either a key, card or online - already pay more than credit customers and many of them are on low incomes. And some experts reckon we will see more of these meters installed when the cold weather arrives and more people are struggling to pay their bills, because those who cannot pay are often switched to prepayment meters.
Energy companies can claw back debt using a prepayment - or pay-as-you-go meter, as the meter can take back a small amount towards the debt every time the customer tops up.
Read more: Easy trick to beat price increase if you have an old pre-pay meter
But independent research from the Vulnerability Registration Service (VRS) has uncovered that the most vulnerable people in the UK are more likely to be moved onto higher cost prepayment meters than the general population with 8% of vulnerable people moved on to prepayment meters in the last 12 months compared to 4% of the total UK population, despite Ofgem banning forcible installations for the most vulnerable in 2018.
The not-for-profit VRS defines someone as vulnerable if they have health conditions that affect the ability to carry out day-to-day tasks, struggle to withstand financial or emotional shocks or their level of knowledge of financial matters or managing money is poor. People with poor English language or literacy skills would also be considered vulnerable
The VRS found that 11% of those people who were moved onto a prepayment meter had low resilience and were unable to cope with any kind of financial or emotional shock, while 12% had low knowledge, confidence or capability when it came to managing their money. Despite Ofgem pressure to improve identification of vulnerable customers, only 18% of vulnerable people reported that they had been asked by their utility provider if they are vulnerable, but once that did happen, 84% said their vulnerable customer status was taken into consideration and they were treated fairly.
While energy companies have been urged to reduce disconnections and find better ways to resolve debt, 2 million (4%) people said they were still threatened with their gas or electricity supply being disconnected. Among those who were highly vulnerable this figure climbed to 7%. 4.3 million (8%) UK adults have missed gas and electricity bill payments or gone into arrears, while 4 million (8%) have been fined for non-payment or late payment of debts. This picture is worse for vulnerable people – 15% and 15% of vulnerable people respectively.
Helen Lord, CEO of the VRS, said: “These are vulnerable people who are already at breaking point, often already facing extreme levels of debt, mentally unable to understand their finances or manage their day-to-day tasks or physically far more reliant on services from their utility providers. It is unacceptable that people that can least afford it are paying more for their energy and being put at risk of harm. This needs to stop. It is hard enough for any person trying to get through to organisations online or on the phone. Those most in need of support shouldn’t be left to fight for it when they are often the least able.
“Utility firms need to take action to better identify and provide targeted support to their vulnerable customers – the data and resources are available to do this right now. Our VRS data can help utility firms identify right now who in their database is vulnerable, so that they can allocate their resources effectively and be proactive.
Families paying for their energy by monthly direct debit or quarterly are also at risk of running into trouble, as research from Uswitch earlier this year found that a total of 14million households are likely to be facing winter with no credit on their energy account amid a serious cost of living crisis. Energy debt is now the most common form of debt, and debt charities including Citizens Advice Newcastle, have called for more support from the Government before struggling families are hit with winter bills.
Typically, the summer months see households building up energy credit, helping shield them from rising energy usage in winter. But as household energy debt increased over the summer, concern is growing for how struggling households will be able to manage their debt and pay for their essential utilities. Social media campaigns and advice during the summer has suggested that struggling energy households should only pay for what they have used or can afford, which is leading to households not building up credit for colder, more expensive, months. This could prove catastrophic for struggling households when bills increase tomorrow (October 1).
A spokesperson from Citizens Advice Newcastle said: "Citizens Advice nationally supported more people unable to top up their prepayment meter in June than it did in January. CAB has supported over 120,000 people with access to food banks and other charitable support, which is more than numbers seen in 2019 and 2020 combined.
"Locally at Citizens Advice Newcastle, we have seen over one and a half times more clients by this point in the year for energy compared to 2021 and dealt with almost three times as many energy issues alone. The scale of this crisis is unlike anything we’ve seen, even in the pandemic. Strikingly we’re helping more people with crisis support like food bank referrals and access to grants because they simply can’t pay the bills or put food on the table."
Although the CAB recommends people struggling with paying their bills should contact their supplier first, the Uswitch research shows that only six per cent of bill payers have considered this, although separate research by Sagacity shows two in three Britons don't trust their energy providers, believing they are 'out to rip them off', while two in five think suppliers just make up the numbers on bills.
The spokesperson encouraged people who have fallen behind with your household bills not to wait to get help. "Contact your supplier to let them know you’re struggling, they may be able to offer support and inform you about any available grants to pay off a utility bill, or negotiate an affordable payment plan," she said. "You can also contact your nearest Citizens Advice local office. We have an energy advice team who can support people with their energy and financial commitments and look at other forms of help available. The important thing is to seek tailored support."
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