‘Unsustainable’ prepayment meters could see households spend third of income on energy, experts warn

Households on prepayment meters in the UK could see their energy bills cost up to a third of their household income this winter, new research has warned.

The most vulnerable households will be worst affected, the findings from the Resolution Foundation show, as higher prices and colder weather have a disproportionate impact.

The UK’s four million households on a prepayment meters will need to spend an estimated 30 per cent of their income or more on energy bills, after housing costs, across December, January and February.

These meters are generally concentrated in low-income households in the UK. They are most commonly installed in rented homes, with users required to pay for energy as they go and before it is used.

People in these households “remain overlooked” says the report, adding that “as [prepayment meters] are concentrated among poorer families, this drain on family finances is unsustainable, leading to families sitting in cold, dark homes.”

Researchers also point out that over half of the households on these meters are in debt to their energy suppliers which, as this debt is paid when meters are topped up, is adding to the struggle to keep warm.

Previous analysis from Citizen’s Advice has found that 1.7 million people in Britain ran out of credit on their prepayment meter last year, while 800,000 went at least 24 hours without electricity or gas entirely.

Energy bills for all households will be increasing from January, as Ofgem’s energy price cap rises by 1.2 per cent to £1,738. This follows a massive 10 per cent in October, and is expected to rise again in April.

Jonathan Marshall, the principal economist at the Resolution Foundation, said: “For many households, the recent energy crisis is an episode they’re keen to forget. But for the million households on prepayment meters this winter, it will feel like the crisis never ended.

“Persistently high energy costs and heavy use during the cold winter months mean that households on prepayment meters are set to spend almost a third of their family budgets on energy during the next three months. These high costs can squeeze out other important spending and increase the risk of people rationing their energy use in a way that can harm their health.”

A spokesperson for the Department for Energy Security and Net Zero said: “We are doing everything we can to support vulnerable families this winter – including through the £150 warm home discount expected to support 3 million eligible households, while around 1.3 million households in England and Wales will continue to receive up to £300 in winter fuel payments.

“In November, Energy UK, in collaboration with the government, published a winter 2024 commitment which promises £500m of industry support to bill payers this winter. This includes credit on bills or prepayment meters, and enhanced debt write-off schemes and hardship funds.

“We welcome the steps already taken by Ofgem to protect prepayment meter customers, and we will continue to work closely with them to ensure that suppliers only install involuntary prepayment meters as a last resort – ensuring consumers can afford to pay for their energy.”

For the latest cost of living advice and support this winter, visit The Independent’s regularly updated guide