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Last Updated: Wednesday, 5 December 2007, 11:34 GMT
Energy companies 'exploit poor'
Gas ring on cooker
There are 2.2 million prepayment gas meters in Britain
Energy companies have been accused by an industry watchdog of exploiting some of the poorest people in society.

Customers with pre-payment meters are paying hundreds of pounds more for electricity and gas than those with access to the cheapest tariffs.

According to Energywatch, some people cannot take advantage of lower tariffs because they do not have bank accounts.

Customers on the meters are charged an average of 195 more a year than those paying by direct debit, it said.

In some cases, customers using meters have been found to pay as much as 304 more a year.

The cheapest tariffs are typically available to those who apply online and pay by direct debit.

'Morally bankrupt'

Many consumers prefer to use pre-payment meters to pay for gas and electricity.

It allows them to budget and to pay as they go along rather than face an unwelcome bill.

But others have no option.

"That they should ramp up the rates and exploit those with no access to alternative payment methods is morally bankrupt," said Energywatch chief executive Allan Asher.

The industry regulator Ofgem says companies install pre-payment meters when a customer has difficulty managing their energy bills.

They are common in rented accommodation and holiday homes. There are 3.5 million electricity and 2.2 million gas pre-payment meters in Britain.

The real issue here is how best to look after fuel poor and vulnerable customers
Energy Retail Association
Energywatch claims that the number of meters being installed each year has been rising due to soaring energy bills.

Some 580,000 pre-payment meters were installed in 2006.

Energywatch claims that 63% were installed by companies to recover debts, which would limit the ability of those households to switch to cheaper suppliers or payment methods.

The industry also argues that pre-payment tariffs tend to be higher because of the expense of maintaining the meters and the payment system.

Ofgem calculates that the additional cost of providing gas or electricity by pre-payment is 85 per household.

But according to Energywatch, even after these costs are taken into account, the industry is making close to 300m a year in revenues from customers on pre-payment meters.

'Blunt instrument'

The body representing energy suppliers defended the use of pre-payment meters which it said gave customers more control over the amount of energy they use.

Duncan Sedgwick, chief executive of the Energy Retail Association, said equalising energy tariffs would be "a blunt instrument to tackle a much more complex issue".

"The real issue here is how best to look after fuel poor and vulnerable customers," he added.

"All the major energy companies have a raft of measures in place to do this including grants for free insulation, trust funds for people in fuel debt and cheaper payment options."

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