Prepayment meter customers to pay less for energy from today
Prepayment meter households will no longer pay more on average for their energy than direct debit customers, as the government scraps unfair charge.
- Unfair charge on prepayment meter customers scrapped
- change will help around three million households and save on average £21 a year
- together with the new energy price cap taking effect today, households will save hundreds of pounds on their bills
Fairness will be delivered for households today as the government scraps the unfair charge on prepayment meter customers.
The change, taking effect from today, will help around three million households using prepayment meters across Great Britain - bringing their bills in line with those who pay by direct debit, with the government stepping in to cover the difference.
Currently, households on the pay-as-you-go meters pay more on average than direct debit customers, as it costs suppliers more to service their homes – such as collecting payments or giving out vouchers – with the charges passed onto consumers.
Removing the prepayment meter premium means these households will save around £21 a year on their bills, making sure the system is fair and providing extra support to consumers who are typically on low incomes.
Scrapping the prepayment meter premium comes as Ofgem’s latest price cap takes effect today - which thanks to improvements in the wholesale market, will bring the typical annual energy bill down from £2,500 under the Energy Price Guarantee to around £2,074. This will help lower inflation – one of the Prime Minister’s five promises – as high energy prices drive up prices across the economy.
The fall in energy bills will save the average household around £426, or 17%, and means for every £100 previously spent on energy bills, consumers will now pay £83.
Energy Consumers and Affordability Minister Amanda Solloway said:
No one should be charged more for having a prepayment meter - today, we’re putting an end to this historic injustice.
With households on prepayment meters typically on some of the lowest incomes, this is a vital change.
Alongside the hundreds of pounds coming off energy bills from today, thanks to the fall in the price cap - this will offer extra help to ensure families stop being unfairly penalised.
To ensure the prepayment premium comes to an end as quickly as possible, the Government will be funding the change up to April 2024. Ofgem as the energy regulator will be devising a plan that will eradicate it permanently after that date.
Earlier this year the government took steps to crack down on the abuse of prepayment meters by energy suppliers. The Energy Security Secretary Grant Shapps demanded action from Ofgem and suppliers to put an end to wrongful prepayment meter installations in vulnerable households.
The government is clear moving customers to prepayment meters must always be the very last resort and has asked for regular updates from Ofgem and consumer groups to make sure all suppliers adhere to the regulator’s new Code of Practice – which puts measures in place to protect against them being installed in homes where they shouldn’t be.
Recent figures showed nearly £40 billion was spent by government between October 2022 and March 2023 to help keep household and business energy bills down, the most ever provided to subsidise household bills in UK history.
Over winter, the government covered nearly half a typical household’s energy bill and saved the average home roughly £1,500 by the end of June. That included providing £650 million to households on traditional prepayment meters through the Energy Bills Support Scheme. The scheme saw vouchers totalling £400 issued over six months from October with latest figures showing 85% had been redeemed by the end of May. While the deadline for applications has passed, that number is expected to rise with the last applications and reflected in figures due over the Summer.