The proposed price cap for energy customers with prepayment meters will come into effect in April, saving customers an average of £80 a year, according to Ofgem.
The cap is one of the proposals that came out of recent two year investigation into the energy market conducted by the Competition and Market Authority. The investigation found that around 17% of electricity customers, and 15% of gas users in the domestic market were using prepayment meters.
Prepayment customers are likely to be among the most vulnerable energy users, with a high rate of fuel poverty among them. The relatively high prices of energy through prepayment meters exacerbates this problem and, as such, the proposed price cap is seen as at least one way to help out customers who need it most.
Dermot Nolan, Ofgem chief executive, had this to say: “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.”
That there would be some kind of cap was made clear late last year, but Ofgem have now ironed out the details, and will be rolling it out in April this year. According to their estimates, the typical prepayment customer will see their annual gas bill shrink by between 10 and 15%, equivalent to around £80. Those who use electricity to heat their home will see similar reductions.
The exact capped value will vary from place to place, as well as by actual meter type. It will also be revised regularly – on the 1st April and 1st October each year. It is expected to remain in place until 2020, by which point the smart meter rollout is intended to be completed.
