Advertisement

  1. ITV Report

Ofgem sets price cap on energy prepayment saving customers £80 a year

Prepay customers are more likely to face higher tariffs. Credit: PA

A price cap for energy prepayment customers is to come in to force in April that is likely to save customers up to 15% on their bills.

Regulator Ofgem is bringing in the temporary cap in response to the Competition and Market Authority's (CMA) two-year investigation into the energy market.

It will apply to over 4 million households who use prepay meters for their gas and electricity use and are least able to benefit from competition.

The price cap will vary for electricity and gas, meter type and region but will save a typical customer around £80 a year, Ofgem said.

The CMA report found that prepay customers, who are more likely to be in vulnerable circumstances, generally face more expensive tariffs.

Ofgem said the cap could save customers up to 15% off their bills. Credit: PA

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."

The Citizens Advice charity welcomed the change but called for the government to cut bills for other customers on standard tariff and extend eligibility for discounts.

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."

The cap will last until the end of 2020 when the roll out of smart meters is set to be completed which Ofgem says could help customers access better deals.