Citizens Advice says it has seen a sharp increase in people needing crisis support, such as emergency grants.
Calls are growing for energy suppliers to stop forcibly switching customers who struggle to pay their bills onto prepayment meters.
Citizens Advice said the practice should be banned as it saw a sharp rise in clients needing crisis support, such as emergency grants.
Ministers are also preparing to write to regulator Ofgem about the issue.
It comes as British Gas said it would stop remotely switching smart meters to prepay mode.
However, the UK’s biggest energy supplier did not rule out forcibly installing prepayment meters in people’s homes.
‘More expensive’
People using prepayment meters pay for their gas and electricity by topping up their meter, either through accounts or by adding credit to a card in a convenience store or post office.
This is a more expensive method of paying than by direct debit, but is sometimes the only option for people who have struggled to pay and are in debt to an energy supplier.
However, critics say it leaves vulnerable customers at risk of running out of credit and “self-disconnecting” when they cannot afford to top up.
To date, an estimated 600,000 people have been switched to prepay, according to Citizens Advice, either by their supplier physically installing a meter in their home, or automatically having their smart meter switched to prepay mode.
In a letter to Ofgem, the Department for Businesses is expected to call for greater scrutiny of whether these switches are justified.
Energy suppliers point out that if customers are allowed to build up unaffordable debts, then this money would eventually be recouped from everyone’s energy bills.
Citizens Advice said it helped more people unable to top up their prepayment meter last year than in the previous 10 years combined.
It said that among its clients, 38% of those were single people, and 37% were single parents.
The data also shows that, among its clients, a majority of people in this situation were disabled or had a long-term health condition.
Dame Clare Moriarty, chief executive of Citizens Advice, said: “In the past, prepayment meters may have worked as a solution for some people on a low-income.”
Now, she said these meters were a “squeeze point” for people’s finances, leading to some sitting in “cold, dark homes”.
Audrey Ridson, 81, from Hampshire, told the BBC earlier this month that she was in hospital recovering from a fall when her energy firm switched her to a prepayment account.
“[The supplier] said: ‘We’ve changed it over already to a card payment and you’ll have to go to a local shop [to top up the meter]’.
“My daughter-in-law said: ‘She won’t be able to do that. She’s got to have a special walking stick. She won’t be able to get up to town’. And they didn’t listen to her. It was dangerous to go up there for me because I had this injury.
“They charged me nearly £200 a month just for a shower and a light near my cooker,” Audrey told the BBC.
She added that she had built up arrears while she was recovering in hospital from the fall.
Dhara Vyas, deputy chief executive at Energy UK, which represents energy firms, said: “Suppliers are required to have exhausted all other options before installing a prepayment meter by warrant – only after repeated unsuccessful attempts to contact the customer to discuss repayment options and checks to ensure they do not go ahead when customers are in the most vulnerable situations.”
She said that difficult decisions had to be taken about indebted customers, as suppliers were required to try to prevent them falling further into arrears.
“Any increase in bad debt ultimately ends up costing all consumers more money, as it is recouped from bills,” she said.
The boss of British Gas, Chris O’Shea, said his company would stop remote switching of smart meters, and pledged £10m in support. This could include non-repayable credit of up to £250 for those struggling the most to top-up their meter.
“We know that some prepayment customers are self-disconnecting and not coming forward for help, so we have reviewed our policies to do more to target support at this group,” he said.
Other suppliers have offered crisis help and reduced some of their demands on paying back emergency credit.
Why is this allowed and what can you do?
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