Ditch prepay and switch suppliers, Ofgem tells energy customers

The energy watchdog Ofgem today urged people on prepayment schemes for gas and electricity to switch suppliers to save money.

Managing director at Ofgem, John Neilson, said: "Some vulnerable customers use prepayment meters and many of them are missing out on valuable savings. We have worked hard to remove the barriers that prepayment customers face when trying to switch supplier. However, many prepayment customers are still losing out because they have not switched."

A report published today by the National Audit Office (NAO) showed that many consumers on low incomes use prepayment meters, often because they find it makes budgeting easy. However, the report found, prepayment schemes are the most expensive methods of payment.

According to the NAO, 3.5 million people use such a scheme to pay for bills, but prepayment costs on average ?63 a year more than a direct debit scheme.

"While we recognise that some customers prefer prepayment meters because they help them budget, others may be willing to change to direct debit and so benefit from greater savings in paying their gas and electricity bills," said Mr Neilson.

In the past, people who have got behind with payments to their energy company have been prevented from switching to a cheaper supplier. Ofgem has worked with suppliers to develop a scheme, launched in October 2003, to help people who owe up to ?100 to their supplier, and who use prepayment schemes, to switch to a different supplier and billing method in order to save money.

Sir John Bourn, head of the NAO, said: Ofgem's actions were "to be applauded". He said: "It is important now to continue to improve awareness among vulnerable consumers of the ways in which they can benefit."

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