Price cap to protect prepayment energy customers comes into effect

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A temporary price cap to protect over four million households who prepay for their energy comes into effect this weekend.

Ofgem said the cap would save typical prepayment customers around £80 a year, with many seeing a reduction in their gas bill of around 10-15%.

All prepayment customers are urged to top up as soon as possible from Saturday to start taking advantage of the new lower prices.

Until they top up, meters will continue to use energy at the old rate.

The cap is one of the Competition and Markets Authority (CMA) remedies following a two-year investigation into the energy market.

The investigation found prepayment meter customers face "particularly high levels of detriment" as competition among suppliers is less developed than for those who pay by direct debit, cash or cheque.

This means there are fewer tariffs available to these customers and the tariffs that are available are generally more expensive.

Ofgem chief executive Dermot Nolan said: "Our number one priority is to protect consumers while we work to make the energy market smarter, fairer and more competitive for all consumers.

"Households who prepay for their energy can have peace of mind that the price they pay reflects the underlying costs of supplying their energy thanks to the price cap which we are introducing."

Andrea Coscelli, chief executive of the CMA, said: "Households across the UK deserve to get a fair deal on their energy bills.

"On top of a number of measures to get competition working better, the CMA's prepayment meter price cap means that more than four million consumers, many of whom are vulnerable, and who can't easily shop around for a better deal, will see their bills cut by around £80 a year each, saving British customers a total of £320 million per year."

The cap is due to expire at the end of 2020 when the roll out of smart meters is set to be completed.