Government confirms that households with prepayment meters will no longer pay more on average for their energy than direct debit customers

Removing the prepayment meter ‘premium’ expected to save households around £21 a year on their bills

The government has confirmed that households with prepayment meters will no longer pay more on average for their energy than direct debit customers.

Announcing the change over the weekend, the government says that from 1 July 2023 it is removing the prepayment meter 'premium' – that has meant that households on pay-as-you-go meters pay more on average than direct debit customers in order that suppliers recoup the extra costs of managing the energy supply and payment method – meaning that –

'… 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.'

In addition, the government confirms that –

'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.'

NB – the government also highlights that Ofgem’s latest price cap came into effect on 1 July 2023, bringing the typical annual energy bill down from £2,500 under the Energy Price Guarantee to around £2,074.

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.'

For more information, see Prepayment meter customers to pay less for energy from today from gov.uk

Update (4 July 2023) – Ofgem has confirmed that alongside its expectations for energy suppliers on financial resilience and supporting consumers, and following a round table discussion held at Number 11 between the Chancellor Jeremy Hunt and utility regulators, it is moving ahead with plans to ensure that prepayment meter customers pay no more than those on direct debit to take effect once the government support announced yesterday expires in April 2024.