Big six energy companies make the poor pay more

From The Times, via the Campaign for Public Ownership:

Energy ‘tax’on the poor
Steve Hawkes and Philip Webster

The big six energy companies are charging the poorest customers up to £330 a year more for gas and electricity, it emerged last night.

Tariffs for prepayment meters, used typically by pensioners and the less well-off, are up to 45 per cent higher than for internet customers. The industry watchdog branded the practice a £400 million rip-off.

The details came as the Government plans a crackdown on energy companies that take advantage of their poorer customers. Alistair Darling, the Chancellor, is ready to deliver an ultimatum to E.ON, npower, British Gas and other companies in his Budget next week.

The gap between the tariffs has grown after a round of inflation-beating price rises across the sector, despite Mr Darling urging companies to do more to help people on low incomes. The Chancellor will stop short of imposing a windfall tax on their £9 billion profits.

A Treasury source said: “There are other ways of tackling this.” Mr Darling expects the companies to tackle the “inequity” of consumers who use prepayment meters being charged more than people who pay by direct debit – or face “the big stick of intervention”.

More than 4.5 million people are in fuel poverty – spending more than 10 per cent of income on heating their home.

Figures compiled by Energy-watch, the watchdog, show that on average prepayment customers are charged £255 a year more than online customers for power, compared with £190 before Christmas.

E.ON’s prepayment charge is an average of £1,097 – 45 per cent higher than its internet tariff of £769. British Gas charges its prepayment customers 30 per cent more.

Graham Kerr, of Energywatch, said: “We have hard evidence of £400 million of excess profits being taken off the poorest members of society just at a time when fuel poverty is continuing to rise. Instead of taking from the rich to give to the poor, it seems that energy companies are taking from the poor to give to the rich.”

Energywatch’s figures come amid increasing expectation that the Chancellor will address the issue of fuel poverty in the Budget and could “shame” companies into taking more action.

Yvette Cooper, Chief Secretary, and Malcolm Wickes, the Energy Minister, are understood to have held a series of talks with industry leaders this week. The Times has been told that the ministers are urging the companies to give more information to customers about their ability to switch from company to company.

A new system of vouchers for cheap electricity and gas for people on low incomes has also been proposed.

Gordon Brown hinted yesterday that he expected the energy companies to do more to help people on low incomes. He backed the inquiry by Ofgem into the energy and electricity markets. “It is right that he [the head of Ofgem] pursues an investigation to see whether competition is working effectively in the industry,” he said. It was also true that windfall profits had been made by the energy companies because of the European emissions trading scheme.

The Prime Minister said in the Commons yesterday that while energy companies had made extra money available for the poorest, “that is a small amount in relation to what the Government are doing through the winter allowance”.

The current allowance is £200 for the over-60s and £300 for the over-80s. “This winter, when people are experiencing high utility bills, the winter allowance that we are giving is crucial”, he said.

One in five prepayment customers is classified as fuel-poor. A third of single parents with dependent children use gas prepayment meters.

A spokeswoman for E.ON said last night: “The cost of the prepayment meters are more expensive and we are currently looking at a major meter replacement programme. I don’t think it’s 100 per cent fair to compare prepayment with online.”

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