More than 400,000 households in the South West plan to cut back on heating this winter because of fears over paying energy bills, according to consumer watchdogs.
Consumer Focus which has released new figures said people were living in cold properties while failing to claim free help they are entitled to.
Charities including Citizens Advice, Age UK and National Children's Bureau are now urging the poorest households to take advantage of the Government's Warm Front scheme that offers free heating and insulation improvements.
Over 2011-12 the Warm Front scheme was under-spent by over £50 million. While it was over-subscribed in 2010-11 the number of applications has since fallen sharply.
Between April and July this year only 993 people from across the South West applied, making it one of the lowest claim-rates of any region in England. Figures were released this week as the Government relaxed eligibility for the scheme. According to Consumer Focus, a number of factors contributed to a slump in demand including strict eligibility and failure by the Government to advertise the scheme because they anticipated demand would exceed supply.
A spokesman for the organisation said: "A milder winter may have meant fewer people were prompted to apply.
"But it also seems there was a fall in the number of advice organisations referring people to the scheme due to the tighter eligibility restrictions and the smaller funding pot."
Jonathan Stearn, programme director at Consumer Focus, said the scheme could shave up to £600 a year off bills. He said: "A cold home can damage your health. So it's very worrying that high energy prices are leading so many people to cut back on their heating. We want to make sure that as many people as possible are helped to cut their bills and stay warm and well through the Warm Front scheme this year. We would urge anyone struggling with their bills to find out if they can claim free help."
Gillian Guy, chief executive at Citizens Advice said: "We're really worried people are struggling with their fuel bills because they live in homes that haemorrhage heat."
Mervyn Kohler, special adviser for Age UK, said Warm Front was being phased out and if the money wasn't spent it would go back into government coffers.
He said: "When this year's budget is exhausted, that's it.
"A cold home is a serious health hazard, and older households – who are particularly at risk – can act now, knowing that by Christmas they will be warmer and better prepared for the dangers and worries of a cold winter."
Rachel Monaghan, senior development officer, health and well-being at the National Children's Bureau, said some families with children in the South West will have to make the choice whether to heat or eat this winter.
She said: "We know many families are struggling to cope with rising fuel bills and are having to cut back on other essentials like food.
"We also know that growing up in a cold and damp home can have a real effect on children's health, learning and enjoyment of life."