Pre-payment meter debt rises to £1 billion

The amount of debt racked up by prepay energy customers has hit £1 billion according to new research by Bfy Consulting.

Over the past two years, the number of prepayment meter (PPM) energy customers in debt has risen by 220,000 to 750,000 – a 40% increase.

The average debt balances have also risen by 40% (up £400 to £1,300) – resulting in a 100% (up £500m to £1bn) increase in total pre-payment meter debt.

In early 2023, energy companies were forced to halt the installation of pre-payment meters under warrant (typically referred to as a ‘forced installation’), due to concerns with the approaches taken during installation.

While the 2023 install ban was in place, the volume of accounts in debt grew by 5%, but average balances grew by 25% (£250) as total debt grew by 30% (~£250m) in the period. Some of the debt growth will have been driven by customers seeking Additional Support Credits, as they struggled to pay for their energy and relied on support from suppliers.

Pre-payment meters are only installed as a last resort – the debt at the point of PPM installation is typically ~15-18 months of consumption, as of Q3-2023 this is ~£1,300. Without a pre-payment meter installed, customers can continue consuming without paying – which increases their debt balance, and ultimately puts them in a worse position overall.

Bfy Consulting says that rising PPM debts highlight a critical challenge in the energy sector: balancing the provision of essential services with financial sustainability. The installation of pre-payment meters is going to be under increased scrutiny from Ofgem, and suppliers will be expected to drive customer engagement earlier in the arrears process.