Energy

What is the poverty premium in energy?

The poverty premium in energy exists when people in poverty pay more for their energy. This is due to a range of factors including how people pay for their energy and, in normal times for the energy market, whether they can switch to a better deal.

Prepayment meters

Historically people have paid more for their energy when using a prepayment meter.

In the Spring Budget 2023 the Chancellor asked Ofgem to get rid of the prepayment meter premium for good.

A year later, in February 2024 Ofgem announced the elimination of this premium permanently. This announcement was a big win and follows years of campaigning for this poverty premium to be eliminated.

Payment on receipt of bill (standard credit)

Consumers who pay on receipt of a bill (also known as standard credit) spend an extra £131 (from 1 April to 30 June – please note this figure varies with the price cap) compared to those using direct debit.

Switching premium

The switching premium occurs when consumers do not switch to the cheapest energy tariff. This could be because they don’t have enough time to switch or know how to get the best deals.

The switching premium disappeared during the energy crisis. As energy prices fall and the market goes back to “normal” this premium may return.

What we're doing

Energy Social tariff

We are campaigning for the introduction of an energy social tariff. A social tariff is a targeted, discounted tariff. It should be designed to make sure everyone can afford enough energy to keep them safe and well. We want to see eligible low-income households automatically enrolled on such a tariff and for it to be paid for by general taxation rather than energy bills. We are working across a coalition of organisations campaigning for the introduction of an energy social tariff.

Read the Public First report we commissioned on how to deliver a social tariff

Levelising payments in energy

At present you pay a significant premium for paying when you receive your bill (also known as paying by standard credit). This is the extra cost paid by consumers who pay their bill when they receive it compared to those who pay by direct debit. Currently, the standard credit premium is £131 (from 1 April to 30 June). We want to see the extra costs for paying for energy on receipt of bill reduced, if not eliminated permanently.

Read our research on the standard credit premium

Close Up Of Mature Man Trying To Keep Warm By Radiator At Home During Cost Of Living Energy Crisis

Warm Home Discount campaign

The Warm Home Discount (WHD) is a one-off payment (£150) to help with the cost of energy during the winter. It is targeted at low-income and vulnerable households to help them afford their energy bills and is taken directly off their bill.

In June 2025 the Government extended the WHD to cover double the number of households — now reaching over 6 million — with those on means-tested benefits being automatically enrolled.

Whilst we welcome this increase to some people but not all (those on non-means tested disability benefits are not eligible despite long term health conditions often leading to higher energy usage), it is not enough with energy bills still hundreds of pounds higher than in 2020.

In the long run, we would like to see the WHD expanded and the amount increased.

Read our latest Warm Home Discount consultation