Potential discount for prepayment meter customers

masonic

superkoopauk said:

It's a charge for non PPM customers rather than a discount for PPM

However you view it, if this was enacted, then there would be a lot of interest in prepayment meters from people who currently pay by monthly direct debit. It is interesting that in the past, prepayment meters were an expensive way to pay for energy, then Ofgem levelled the pricing, and now intends to make PPM the cheapest way to pay for energy.

If enough people shift to PPM, the cost that would need to be loaded onto those who pay monthly to cross-subsidise energy companies pursuit of non-payers will become more and more significant, driving yet more people off monthly payment. I don't really understand how this has got as far as the consultation stage without someone spotting the fatal flaw.

lohr500

We are with EDF on their ECO20:20 tariff. I switched to prepayment on our Smart Meter a few months ago from monthly budget DD because it worked out a little cheaper for us.

So far it has proved a painless exercise with the automated top-ups going ahead as and when needed.

QrizB

I suspect £16 a year (4p a day on the standing charge) isn't enough incentive to get more than 1-2% of credit account customers to switch to PPM.

masonic

QrizB said:

I suspect £16 a year (4p a day on the standing charge) isn't enough incentive to get more than 1-2% of credit account customers to switch to PPM.

Perhaps you're right. It all depends how the media spin it if it comes to pass. At least those who object to suppliers holding on to too much of their money via the DD system have a way of addressing that which will also potentially save them money.

MeteredOut

QrizB said:

I suspect £16 a year (4p a day on the standing charge) isn't enough incentive to get more than 1-2% of credit account customers to switch to PPM.

But the headlines won't be 4p a day, it'll be shouted as an above-inflation 7-8% increase in the evil standing charge. Gotta get those clicks!

TheBanker

I work for a bank. Ultimatley if you cannot afford to repay your mortgage, we will reposess your house. Before it gets to that stage, there are many steps that are followed to try to find a different solution and support the customer if their difficulties are temporary. And there are checks and balances including the need for permission from a court to reposess someone's home. But, ultimatley remaining in the house without paying is not an option.

Why should it be different for electricity?

If the banking regulators worked in the same way as OFGEM, the banks would not be reposessing houses. Instead they'd be adding a levy to everyone elses' mortgage to cover the missed payments so that the people who can't/won't pay can continue to live in their house for free. 

masonic

TheBanker said:

I work for a bank. Ultimatley if you cannot afford to repay your mortgage, we will reposess your house. Before it gets to that stage, there are many steps that are followed to try to find a different solution and support the customer if their difficulties are temporary. And there are checks and balances including the need for permission from a court to reposess someone's home. But, ultimatley remaining in the house without paying is not an option.

Why should it be different for electricity?

If the banking regulators worked in the same way as OFGEM, the banks would not be reposessing houses. Instead they'd be adding a levy to everyone elses' mortgage to cover the missed payments so that the people who can't/won't pay can continue to live in their house for free. 

In fairness, I think the proposed levy goes towards the costs of debt recovery, not the energy companies changing their approach and giving up after asking nicely.

Debt to energy companies is more like credit card debt than mortgage debt, as it is unsecured. The steps can be worked through, but ultimately there is no secured asset to seize and sell to recover the money owed. If the debtor goes bankrupt or enters an IVA in the case of any unsecured debt, then the lender faces a loss.

ProDave

masonic said:

"Households face paying extra on energy bills to cover customers' bad debts under plans by the industry regulator... Under the proposals, households using prepayment meters would not be charged the extra sum, which works out at £1.33 per month. These consumers pay as they go, meaning they cannot build up debt in the same way as households that are billed monthly."

https://www.bbc.co.uk/news/business-67725424

I'd be happy to pay for my energy in advance to avoid such a levy.

Most of us keep our energy accounts in credit, building up credit in the summer to pay for the higher winter electricity usage.  I think that counts as "paying for your energy in advance" so customers that do that should also not be charged for bad credit.

If I changed to a PPM I would pay less in the summer, not building up that credit, and of course pay more in the winter.  Is that REALLY what they want us to do?

JonVarnas

ProDave said:

masonic said:

"Households face paying extra on energy bills to cover customers' bad debts under plans by the industry regulator... Under the proposals, households using prepayment meters would not be charged the extra sum, which works out at £1.33 per month. These consumers pay as they go, meaning they cannot build up debt in the same way as households that are billed monthly."

https://www.bbc.co.uk/news/business-67725424

I'd be happy to pay for my energy in advance to avoid such a levy.

Most of us keep our energy accounts in credit, building up credit in the summer to pay for the higher winter electricity usage.  I think that counts as "paying for your energy in advance" so customers that do that should also not be charged for bad credit.

If I changed to a PPM I would pay less in the summer, not building up that credit, and of course pay more in the winter.  Is that REALLY what they want us to do?

Why wouldn't you build up credit on PPM? You do know that you don't have to wait until the meter is just about to run out before you can top-up again, right?

masonic

JonVarnas said:

ProDave said:

masonic said:

"Households face paying extra on energy bills to cover customers' bad debts under plans by the industry regulator... Under the proposals, households using prepayment meters would not be charged the extra sum, which works out at £1.33 per month. These consumers pay as they go, meaning they cannot build up debt in the same way as households that are billed monthly."

https://www.bbc.co.uk/news/business-67725424

I'd be happy to pay for my energy in advance to avoid such a levy.

Most of us keep our energy accounts in credit, building up credit in the summer to pay for the higher winter electricity usage.  I think that counts as "paying for your energy in advance" so customers that do that should also not be charged for bad credit.

If I changed to a PPM I would pay less in the summer, not building up that credit, and of course pay more in the winter.  Is that REALLY what they want us to do?

Why wouldn't you build up credit on PPM? You do know that you don't have to wait until the meter is just about to run out before you can top-up again, right?

I'm guessing (as I don't have any recent experience with PPMs), that the customer would have an element of choice about how much credit they carried on their account, so could maintain enough credit to ensure they don't accidentally run out between top-ups? Back in the days I lived in a property with a PPM fitted, I needed to visit a shop and buy physical cards to feed the meter, so I used to carry a lot of credit to avoid the faff, but with smart meters and online energy accounts, hopefully that's largely a thing of the past.

I currently have a credit account with a variable DD set-up as a backup, but I top up my account by credit card online once or twice a month to keep it in credit and stooze the credit card balance. It appears from early discussion in the thread that smart pre-payment tariffs work in a similar manner.