Today Ofgem, the energy regulator, announced a lasting solution to eliminate the extra costs for paying for energy using a prepayment meter. This announcement is a big win and follows years of campaigning for this poverty premium to be eliminated.
Ofgem also said it had not made a final decision on the extra costs for people who pay for energy when they receive their bill. It plans to continue to explore how to tackle this issue and will publish a consultation by the end of the year. If implemented, a reduction or end to this extra cost would happen from April 2025.
Maria Booker, Head of Policy, Fair By Design, said:
“This is a big win for people on low incomes. Today’s announcement introduces a lasting solution. We welcome recognition from the regulator that people on low incomes should not pay more for their energy.
“We also welcome Ofgem’s intention to bring down the premium for paying on receipt of bill, even if not as soon as we had hoped.
“But the extra cost for those who pay when they receive their bill still exists. We want to see this completely eliminated and will continue to push hard for this change to happen.”
ENDS
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Notes to editors:
- You can find the announcement here. It means that:
- People who use a prepayment meter to pay for their energy will no longer pay more than those who pay via direct debit.
- People who pay for their energy on receipt of bill (standing charges) will still pay an additional £106 compared to paying via direct debit. This has reduced from £130.
- Ofgem also announced the new price cap. From 1 April to 30 June 2024, the price for energy a typical household who use electricity and gas and pay by Direct Debit will go down to £1,690 per year. This is £238 per year lower than the price cap set between 1 January to 31 March 2024 (£1,928). From 1 April 2024, the standard credit (receipt of bill) cap level will be £1,796, a £261 (13%) decrease compared to the previous level. The amount people pay will depend on actual household usage and where people live as well as meter and payment type.
- Fair By Design’s consultation response calling for the equalisation of payment methods in energy was submitted in December 2023: Response to Ofgem’s consultation on changes to prepayment meter standing charges and other debt costs.
- Ofgem’s announcement comes on the back of calls for evidence and consultations after Government tasked Ofgem with finding a permanent way of getting rid of the pre-payment premium.
- Fair By Design is calling for a social tariff as solution to affordability for low income consumers. A social tariff is a targeted discount energy tariff for qualifying low-income consumers. It would mean that customers on low incomes pay a lower price for their energy. It is designed to make sure those in greatest need can access energy during the toughest economic moments
