Ofgem to investigate gas and electricity costs faced by the poorest UK households

The regulator is to examine whether low-income families are forced to pay more for light and heat because prepayment customers are offered a narrow range of tariffs

The gas and electricity costs faced by the poorest households are to be investigated by the energy watchdog following warnings that some struggling families cannot afford to warm up food.

Ofgem’s move comes after MPs said the worst-off – particularly those using prepayment meters – often had to choose between feeding the gas meter and putting food on the table.

The regulator is to examine whether low-income families are forced to pay more for light and heat because prepayment customers are offered a narrow range of tariffs and why they can be charged more than £200 just to switch to lower price rates.

Its moves were welcomed by Frank Field, the former minister who led the Feeding Britain inquiry into growing levels of hunger across the country, as a step toward a “fairer deal for the poor”.

Ofgem is to review the charges faced by households – up to £60 plus a “security deposit” of about £150 – which want to switch from a prepayment meter to a lower rate.

In a letter to the inquiry, Ofgem’s chief executive, Dermot Nolan, said these charges “can act as a barrier to accessing cheaper payment methods for those that cannot afford to pay them” and disclosed it was “reviewing supplier practices in this area”.

Households with prepayment meters are typically offered a selection of five fixed tariffs, compared with more than 30 offered to better-off families who pay their bills by standing order.

Mr Nolan said the watchdog is “liaising with suppliers so we can better understand the reasons for this comparative lack of choice” and also registered concern about the very low number of families on prepayment meters who switch to cheaper rates.

Ofgem is also investigating the rates charged to customers who ring energy companies’ helplines following criticism that mobile phone users, who are often from poorer homes, face higher rates.

Mr Nolan said: “We note that even free phonelines carry a cost if dialled from mobiles and we believe that the cost of calling can deter people from accessing services or cause them financial detriment if they are left waiting on the line.”

Mr Field, a Labour MP, said: “Ofgem has taken what could be the first steps towards a fairer deal for poorer households and, in doing so, it will help ease some of the pressure on their food budgets. We applaud Ofgem for taking on those players in the energy industry who continue to make mega-profits on the backs of the poor.”

The Tory MP John Glen, a fellow inquiry member, said: “Ofgem must do all it can and remember that energy costs represent a proportionately higher share of outgoings for those on the lowest incomes.”