Last year the ‘big six’ announced energy price increases of eight to 10 per cent, with the average dual fuel bill costing £1,385. Against this backdrop of soaring energy costs, Ofgem announced that the number of disconnections for debt fell by 51 per cent from 2010 to 2012 for electricity and by 69 per cent for gas over the same period.

Meanwhile the number of households paying for electricity through a prepayment meter rose by four per cent from 2011 to 2012 and for gas by six per cent. Over seven million people paid for gas and electricity through a PPM in 2012.

The reduction in disconnections and the growth in PPMs has not gone unnoticed and the Commons’ energy select committee is currently asking questions of the ‘big six’. It is an important issue: the link between fuel poverty and PPMs cannot be understated.

Consumer Futures found that 60 per cent of PPM households have an income of less than £17,500 and the Department for Energy and Climate Change itself conceded that the highest fuel poverty rate by payment method is among households paying for fuel through PPMs.

Notwithstanding this, the current government’s approach to tackling fuel poverty among those on prepayment meters has been inadequate.

Ministers have advised consumers to shop around for better deals without acknowledging that PPMs and debt have been barriers to switching. Last December the energy secretary also announced a number of changes to industry levies, resulting in annual savings of £50 for consumers, and he stipulated that PPM users would see this benefit too; but details of how this will be implemented have not been forthcoming.

Generally, consumers who are moved to PPMs – often because they have fallen into arrears – are put on their supplier’s standard prepayment variable tariff, which is seldom the cheapest. This means that consumers struggling to keep up with payments on their supplier’s cheapest tariff – perhaps an online tariff paid by direct debit – are moved to a more expensive one. Consumer Futures estimates that PPMs cost consumers £253 more on average.

Moreover, many PPMs are inherited and as a result consumers have never seen instructions on how to manage their meters and have little understanding of how standing charges and emergency credit can accrue and exacerbate debts. Citizens Advice has reported cases where for every £10 a consumer tops up, £7 is recovered in repayments.

Increasingly there are fears over self-disconnection, with consumers simply not topping up their PPMs because they are unable to afford energy prices. With PPM households more likely to be in receipt of state benefits, consumer groups and health charities alike have raised concerns that welfare reforms – including the implementation of universal credit – will only make self-disconnection more commonplace.

Of course, consumers should have choice over how they pay for their energy and PPMs can be used to manage expenditure. PPM users, however, must have the same opportunities as other consumers to switch suppliers and to fixed tariffs, to better and accurate information about how tariffs work as well as fair arrangements for repaying debt.

In 2012 the ‘big six’ voluntarily agreed to Ofgem’s plan to increase the debt PPM users can switch between suppliers. Ministers should now be assessing what impact this had and they should be working through Ofgem to ensure that the ‘big six’ increase the availability of tariffs to PPM households. Suppliers should also be required to provide every new householder with a manual so they have access to information about how their PPM operates. Most importantly, however, ministers must get on top of how debts are repaid: recovering debts as a percentage of money topped up rather than at a flat rate would enable more PPMs households to keep their lights and heating on.

Politicians have acknowledged that the energy market is not serving the needs of consumers. This is especially true for PPM users. With many of these households facing fuel poverty, the government can and should be doing more to prevent disconnections by the back door.

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Fiona O’Donnell is member of parliament for East Lothian. She tweets @FionaODonnellMP

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Photo: Paulina Clemente