The UK Trade & Industry Sec. Stephen Byers' said Wednesday a new �14 million initiative will cut the cost of buying electricity through prepayment meters 6%, lowering power bills for 200,000 households.
The initiative, developed by electricity supplier Powergen PLC, will especially benefit the less well off, he said. The package will eliminate the additional costs of using prepayment meters for Powergen's 240,000 prepayment meter customers within 5 years. It will provide immediate savings of �7 and ultimately will save customers an average of �15/year on a yearly bill of �252.
Prepayment meters are a means of paying for electricity via tokens, key, or cards before it is used. Some 3.7 million UK electricity customers use prepayment meters. Prepayment meters are often used by the disadvantaged. Tariffs for prepayment meter customers are generally higher than other forms of payment, such as direct debit, because of the more complex meters and the additional payment infrastructure.
However, under the energy regulator Ofgem's Social Action Plan, the maximum prepayment surcharge�the extra cost compared with quarterly credit�is limited to �15/year. Noting the higher cost of prepayment, the National Audit Office recommended in its recent report on supplier switching that Ofgem continue to work with industry to reduce the costs borne by prepayment meter customers.
Powergen is also launching a scheme to replace its existing prepayment meters with more reliable user-friendly smart cards. Other planned energy efficient measures include free energy efficiency surveys and state benefit health checks to prepayment meter customers.
Byers said he hopes other energy suppliers will respond positively to help drive down the costs of energy for this group of consumers. He noted competition in energy markets is already playing a big part in making energy more affordable.
A recent report from the National Audit Office suggested consumers who already have switched suppliers are saving �750 million/year on their bills, while another �700 million of savings could be made if consumers who have not switched were to do so. But regulators said many people still cannot keep warm in their homes.
It said the government is developing a concerted strategy to tackle fuel poverty. Byers said one feature of the strategy is the need for the energy industry to play its part in reducing the impact of fuel poverty by providing innovative tariffs and other assistance to the fuel poor.
In addition to the Powergen prepayment meter initiative reported Wednesday, he said other industry initiatives previously announced include the Health Through Warmth initiative, Staywarm tariff, Warm-a-Life, Nest Makers, and Powergen's Age Concern Energy Services.