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Households on Universal Credit 4 Times as Likely to Be On Prepayment Energy Tariffs, Facing Higher than Average Price Hikes


While millions of households will see a rise in energy prices from October, households with prepayment meters will face even steeper hikes and they’re among the families least able to weather them, the Resolution Foundation says.

From 1 October, the energy price cap for the 11 million households on standard variable credit tariffs will rise by £139 or 12%, to £1,277 per year. 

But buried in the media coverage of the hike was another, sharper rise. The cap on prepayment tariffs will rise by £153 or 13%, to £1,309. 

This hike will impact the around 4 million households with prepayment meters, who are more likely to be on low incomes and receiving benefits. According to the Resolution Foundation, four in ten households on Universal Credit have prepayment meters, compared to just one in ten non-UC households.

The Resolution Foundation, a think tank aiming to improve outcomes for people on low incomes, said the energy price shocks couldn’t come at a worse time for struggling households.

The hikes will also take effect the same month that the £20 per week uplift to Universal Credit ends, cutting their disposable income by a typical 5%. 

October will also see Britons turn on central heating, increasing energy use. Unlike credit customers who pay by direct debit, PAYG energy customers don’t see their heavier winter use averaged across the year.

With wholesale energy prices continuing to soar since the price cap adjustment was announced in August, spring could see another sharp rise in the cap. This means they'll be putting more money into their meters to keep on the lights and heating.

The Resolution Foundation is calling on the government to cushion the blow for these households by maintaining the £20 per week uplift to Universal Credit and making the Warm Homes Discount more widely available. 

The scheme offers a £140 rebate on electricity bills between October and March. Low-income pensioners automatically qualify, provided their supplier participates (all large suppliers do). Other households on low incomes and in receipt of certain means-tested benefits can qualify as part of the ‘broader group’ but they have to apply to their supplier and the number of rebates is limited.

In the long term, the government must take further steps to protect low-income households from energy price volatility, Jonny Marshall, Senior Economist at the Resolution Foundation, said. This includes “ensuring the country is less reliant on imported fossil fuels with an extensive home efficiency retrofit scheme, while ramping up renewable energy generation and storage.”

Lauren Smith
Lauren Smith

Lauren Smith has worked as a journalist and copywriter for most of the last decade, covering technology, energy, and consumer rights, in the US and UK.

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