photo credit: Mullers via photopin cc

Citizens Advice has welcomed an announcement by the energy regulator Ofgem to cap the amount prepayment meter customers pay for gas and electricity, which the regulator estimates could save poorer customers up to £160 a year on their energy costs.

The temporary cap comes into force from 1 April 2017 and will remain in place until 2020, when the roll out of smart meters is due to be completed which help prepayment customers to access better deals.

The cap comes in response to a two-year investigation by Ofgem of the energy market, which found prepayment customers are “denied the best deals on the market available to those using other payment methods”.

Initially, over four million households who prepay for their energy are expected to benefit from the new cap – many of whom are widely considered as being the least able to afford high energy costs, or benefit from competition in the market.

Ofgem estimates that many prepayment customers are likely to see reductions in their gas bill of around 10-15% from 1 April 2017, or around £80 a year based on a typical household’s consumption.

Meanwhile, many of those who prepay for electricity, and whom don’t yet have smart meters installed, are also expected to see reductions of around £80 a year – bringing the combined total saving for people who prepay for both gas and electricity to around £160 a year.

The levels of the cap for both electricity and gas will vary by meter type and region.

Dermot Nolan, chief executive of Ofgem, said: “We want all consumers to enjoy the benefits of a more competitive energy market, regardless of their circumstances.

“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.”

Welcoming the announcement, Gillian Guy, chief executive of Citizens Advice said: “This cap should stop some of the poorest households paying over the odds to heat and light their homes.

“For years prepayment meter customers have been paying more for the same gas and electricity as other customers, whilst also receiving a second-class service from their supplier.

“The cap set by Ofgem will help millions save money but action shouldn’t stop there. The government has rightly expressed concern that loyal customers on standard tariffs are paying over the odds for their gas and electricity.

“It could help more struggling households, including low-income pensioners and families, by extending this cap to people eligible to receive the Warm Homes Discount.”

  • Exiled Londoner

    When Labour started banging on about a cap a few years ago, the response from SSE was to apply a 27p a day charge on both gas and electric. This made my bills rise by nearly 30%.

    • Samantha Shakespeare

      To be fair it wasn’t Labour that in effect caused the costs to go up. It was energy companies that were going to do it anyway.
      If you want to reduce your bills change to smart meters with good rates and no standing charge.

      • TheEvilThatMenD0

        Yes it was deary.

        • Samantha Shakespeare

          1) no it wasn’t Labour’s fault, energy companies for donkeys years have been increasing prices unfairly. Mostly in response to the cost of a barrel of oil. So Ed Miliband saying that there should be a cap on energy companies and that they would like to introduce that, is just a coincidence.
          2) deary?!! Really dont patronize me!

          • TheEvilThatMenD0

            Yes it was dreary.

  • Lell Gee

    £80 a year??? I pay more than that a month in Gas alone…

    • Samantha Shakespeare

      I’d have a heart attack if I paid that per month. Change to smart meters with good rates and no standing charge.

  • Samantha Shakespeare

    I’ve hard prepayment meters for years and I wouldn’t go back to paper bills. I know what I am spending and it’s far less than I used to on paper bills. I’ve had a smart meter for a few years now and it’s excellent, especially for me being disabled, No more being down to put the top up key/card into the meter. Everything is automatic.
    Though if people are looking to change to smart meters, check suppliers if they charge a standing charge. Mine doesn’t (Utilita).
    Smart meters are the way to go. Why pay for paper bills that are often wrong and takes ages to rectify, when you can pay as you use, and more importantly save yourself money. I pay roughly £40 per month for both gas and electricity in the summer (That’s about £21 elec and £19 gas). And an extra £20 per month in the winter (£13 gas & £7 elec).
    So my advise is change to a supply to suit your needs.

    • TheEvilThatMenD0

      That’s a life on benefits for you, ever thought of getting a job and stop whinging here all day?

      • Samantha Shakespeare

        1) I have not had a life on benefits.
        2) I have worked hard before my health got worse and even then I went back for college doing 8 HEFC Diplomas over 2 years. Until finally I had to accept defeat that my body & mind was/failing, so therefore i had to apply for sickness benefit….and even then it’s not easy, I’ve had to fight to get what I am entitled to.
        3)who is whinging?? Not me!! And not all day either.

        How about live a bit in the real world before you try and critise other people.

        • TheEvilThatMenD0

          Why are all you Shakespears I come across on disqus all left wing benefits scroungers? Are you all the same person or one big family of work shy scroungers?