Prepayment meter households will no longer pay higher energy costs compared to customers using direct debit payment methods following a change in government policy
Previous charges for prepayment meter households were deemed to be unfair. The unfair charges have now been immediately scrapped, benefitting around three million households in Great Britain. By aligning their energy bills with those who pay via direct debit, the government will bridge the gap and ensure equal treatment for all customers.
Households using pay-as-you-go meters face higher average costs compared to direct debit customers. This is due to the additional expenses from suppliers for work that services customers’ homes, such as payment collection or voucher distribution.
How much will prepayment meter households save?
Eliminating the prepayment meter premium will mean prepayment metre households save approximately £21 on their energy bills each year.
The removal of the prepayment meter premium coincides with the implementation of Ofgem’s latest price cap today. The improved market conditions will reduce the typical annual energy bill from £2,500 (under the Energy Price Guarantee) to around £2,074.
This will help lower inflation and as high energy prices often have a ripple effect on the overall economy. Households will save an average of £426 or 17%. For every £100 spent on energy bills, consumers will now only pay £83.
“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,” said energy consumers and affordability minister Amanda Solloway.
“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,” she added.
Protecting vulnerable households from high energy bills
The government will be funding the change up to April 2024 to ensure the prepayment premium comes to an end as quickly as possible.
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, called for action from Ofgem and suppliers to put an end to wrongful prepayment meter installations in vulnerable households.
The government has stressed that transitioning customers to prepayment meters should only happen as a last resort. It has requested regular updates from Ofgem and consumer groups to ensure that all suppliers comply with the new regulations.
The government allocated nearly £40bn to subsidise energy bills, resulting in average savings of £1,500 per home by June. The Energy Bills Support Scheme provided £400 vouchers over six months to households with prepayment meters, with 85% redeemed by May.
