Alan Whitehead

Labour Party | Southampton Test

WHITEHEAD URGES GOVERNMENT TO END UNFAIR ENERGY PRICING FOR POOREST CUSTOMERS

Dr Alan Whitehead, Member of Parliament for Southampton Test, last night lead a House of Commons Adjournment Debate on the issue of prepayment energy meters, and called for energy companies to stop penalising poorer customers with higher energy prices. Prepayment meter customers tend to be on lower incomes and at greater risk of fuel poverty than other consumers – yet pay much more for their energy.

More than 3 million people nationwide pay for their energy via prepayment meters – and overall, pay millions of pounds more for their energy every year. The higher charges made to prepayment meter customers have been recognised as a major contributing factor to fuel poverty, where those on low incomes struggle to pay for the gas and electricity they need.

Speaking in the House of Commons Dr Whitehead said:

“Ten per cent. of pre-pay electricity customers are in fuel poverty compared with only 3.5 per cent. of direct debit customers. In short, those who need affordable energy most pay far more for it than those who do not. What is worse, because of the nature of pre-payment, most of them are not aware of that fact.”

Dr Whitehead also showed that the gap between the average bills of direct debit customers and prepayment meter customers was widening, saying:

“The differential in 2005-06 was about £70, which was worse than the previous year, and it is even worse now due to the effect of aggressively low-priced online tariffs. The differential may now be about £150 for a combined gas and electricity bill, and it is running out of control.”

Dr Whitehead also highlighted the fact that the income energy companies receive from pre-paid meters is more secure than income from other types of customer, yet the value of this security of income is not reflected in pre-pay meter rates:
“…pre-paid meter income is 100 per cent. secure, unlike direct debits, which can fail through lack of funds, or standard bills, which can go unpaid or need chasing. Indeed, that security of payment is of significant benefit to the energy companies.”
Speaking in response, Malcolm Wicks MP, Minister of State for Energy confirmed that the rising gap between average bills for prepayment meter customers was a matter of concern and announced that he was in discussions with the chief executives of the major energy companies on this matter, and will soon also be meeting with Sir John Mogg, Chairman of Ofgem to discuss the matter with him.

Dr Whitehead is campaigning with the support of the National Housing Federation for energy companies to set fairer prices for customers on prepayment meters The National Housing Federation have called on all the main energy companies to equalise their prepayment meter charges with their standard credit tariffs. Fairer pricing on prepayment meters would help the Government to meet its statutory target to eradicate fuel poverty for vulnerable people by 2010.

Statistics published yesterday by the National Housing Federation showed that energy giant Npower is the worst offender, charging up to £110 per year more to its prepayment meter customers than to standard credit customers who pay by cheque.  The table shows that the next three worst offenders after Npower are Powergen, British Gas and SSE.

Speaking before the debate, Dr Whitehead said:

"The widening gap between prepay meters and other forms of energy pricing is a growing problem in Southampton, particularly because of the growing number of HMOs and flats in our city where prepayment meters are more common.”

“Energy companies are using unfair tariffs on prepayment meters to rip off their most loyal customers and some of the poorest people in society – even though these customers offer 100% security of payment. This is wrong.”
 
"Ofgem wants to tackle this problem by persuading prepayment customers to switch supplier, but there are clearly limits to this approach. According to Ofgem most prepay meter customers are not aware that they are paying more and therefore there is insufficient market pressure for energy companies to equalise their prices.”
 
“The Government and Ofgem should take action now to require all the remaining companies to equalise their tariffs and stop the scandal of the poor paying more for gas and electricity."

David Orr, chief executive of the National Housing Federation, said:

“Npower, Powergen, British Gas and SSE should be ashamed of themselves. They are ripping off poorer customers to fund discounts for those most able to pay. This kind of unfair pricing needs to stop. It is clear that these companies are ignoring their corporate social responsibility. It’s time to bring prepayment meter customers in from the cold.”