Sunday, December 10News That Matters

Energy watchdog lowers prepayment price cap

Energy regulator Ofgem has announced that it will be lowering the level of a temporary price cap on prepayment meters which was first introduced in April.

The move will mean a bill reduction of up to £19 a year for three million customers who rely on prepayment meters for their energy, following on from a £80 drop when the cap first came into force.

Ofgem initially introduced the cap to help alleviate pressure on customers who pay up-front for their energy at a time when many suppliers were implementing significant price hikes.

Prepayment meters are often installed when a household struggles to pay for their gas and electricity, meaning they can be most vulnerable to the impact of higher bills.

When it was first brought in the cap enforced a maximum price for electricity, gas and dual fuel customers dependant on their region.

The average cap was set at between £547.07 and £625.85 per year for electricity and £520.07 per year for gas, but this will now drop to between £528.28 and £600.13 for electricity and £519.74 for gas.

Dual fuel customers will see their average cap reduce from £1,067.14 to £1,048 per year.

Centrica-owned British Gas said the price rise is its first since November 2013
Image:British Gas announced last week that it would be raising its prices for the first since November 2013

The updated caps will come into effect from 1 October and the system will be assessed again in six months’ time.

Ofgem first announced the temporary cap in response to a two-year investigation into the energy market which found the Big Six suppliers were overcharging customers by up to £1.4bn a year.

Prepayment customers were found to be among the worst off, as they had fewer tariffs available to them, and those were generally more expensive than those charged to regular billing customers.

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

Since the cap was announced in February all six of the major energy suppliers have raised their prices for average bill-payers, including two separate hikes from EDF.

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