Thousands being trapped in fuel poverty
Energy companies are trapping thousands of people in a cycle of debt and poverty, Church Action on Poverty (CAP) has said.
The charity makes the claim in its new report on the energy market, "Let Us Switch!", co-published with the not-for-profit energy supplier Ebico.
To mark Cold Homes Week, CAP has called on energy regulator Ofgen to meet with indebted energy company customers to explore how to overcome the major barriers they face in switching to cheaper energy suppliers.
The CAP report says that people on low incomes often pay the most for gas and electricity, because they are forced to use prepayment meters which charge the highest rates.
At the end of 2012, almost seven million people were using prepayment meters – an increase of around 5% from 2011.
Over 80% of these new prepayment meters were installed to recover debt, despite the fact that paying prepayment tariffs make it harder to pay off debt and leave less money for other essentials, including food and other bills.
Of the people who tried to make the switch to more affordable tariffs last year, only 0.17% were able to do so.
Consequently, many people facing the 'heat or eat' dilemma are forced to turn to food banks or payday loans to cover their costs.
The report says that fuel-impoverished households spend a much greater proportion of their income on fuel, with some paying up to 30%, compared to non-fuel-poor households that pay as little as 3%.
CAP's Director Niall Cooper said: "Seven million people are in fuel poverty right now, putting their health at risk and driving many of them into spirals of debt and poverty.
"Politicians tell us we should shop around to find the best prices for energy. But the people in most need are trapped paying the most expensive prices.
"This is unfair, and we know that it's possible to charge Fair Prices to all customers because Ebico already do so. We're inviting Ofgem to meet with indebted customers and discuss how we can best take action."
Ebico supply gas and electricity throughout the UK and charge all customers the same rate, regardless of payment method, usage or whether they take one or both services. They do not apply a standing charge.