Energy cap to save metered customers £80 a year

7 February 2017

Millions of prepayment energy customers – those who pay in advance for gas and electricity using a meter – are expected to save around £80 a year when a new price cap comes into force.

Currently, competition among suppliers for prepayment customers is less developed than for those who pay by direct debit, cash or cheque. This means there are fewer tariffs available to these customers and the tariffs that are available are generally more expensive.

In a bid to improve the situation, the Competition and Market Authorities (CMA) issued plans last year following its energy market investigation, to introduce a temporary prepayment price cap from April 2017.

It’ll last until 2020 when the roll out of smart meters is due to be completed, which should help prepayment meter customers in particular access better deals.

 

The level of these price caps has today been confirmed by energy regulator Ofgem. It estimates that many prepayment customers are likely to see reductions in their gas bill of around 10%-15% or around £80 a year as a result of the caps, which vary by region, meter type, and by gas and electricity.

Dermot Nolan, chief executive of Ofgem, says: “Customers who prepay for their energy are denied the best deals on the market available to those using other payment methods. They are also more likely to be in vulnerable circumstances, including fuel poverty. This temporary cap will protect these households as we work to deliver a more competitive, fairer and smarter market for all consumers.”

Claire Osborne, energy expert at uSwitch.com, adds: “The average big six standard prepayment tariff is currently £1,127 and this cap should offer some much needed breathing room. However, even with this price cap, prepayment customers will still be paying more for their energy than those on the cheapest direct debit plan available.

"If you can, you should switch to a credit meter and take advantage of some of the cheapest deals on the market by paying by direct debit. While all the big six suppliers offer meter changes for free, subject to a credit check, smaller suppliers may charge around £50 for a meter change – but you could easily make this back in savings off your bill in the first few months.

“If you don’t want to change your meter, you can still save by switching to the cheapest prepayment tariff available. You can even switch if you are in debt to your current supplier – up to £500 per fuel – so it is worth taking a look to see if you can get a cheaper deal.”

Ofgem announced plans last month for energy providers to trial schemes to help households to get a better deal – which is another of the initiatives put forward by the CMA.

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