£225: The extra cost of prepaid power meters

Households that use prepaid meters (PPM) for their gas and electricity – usually those on low incomes – are likely to be paying around £225 a year more than customers using the same number of units who settle their bills in arrears or by direct debit, the industry watchdog estimates.

Energywatch has calculated that utility companies are making £400m extra in annual revenue from domestic meters.

"These cost differences have escalated over the past three months as companies show their lack of interest in competing for this group of consumers," said Adam Scorer, campaigns director at energywatch. "In some parts of the country, a PPM consumer will be paying £450 a year more than if they were on a direct debit tariff."

In the Budget last week, Chancellor Alistair Darling identified high prepayment meter charges and inadequate industry provision to help low-income households as targets in the fight against fuel poverty, defined as when more than 10 per cent of net income is being spent on energy bills. Some 4.5 million households in the UK are currently in this situation – a number that is rising all the time.

Mr Darling demanded that energy companies triple their spending on reduced-price "social tariffs" to £150m. He announced an increase in winter fuel payments of £50 for all individuals over the age of 60 and £100 for those over 80.