Ofgem announces energy prepay cap

Energy regulator Ofgem has announced a prepayment cap that is expected to save customers around £80 a year.

The introduction of the temporary price cap, which comes into effect this April, follows a two-year investigation into the energy market by the Competition and Markets Authority.

The cap will initially apply to over four million households who prepay for their energy, mostly with traditional prepayment meters, and are among those least able to benefit from competition.

The levels of the cap vary for electricity and gas, by meter type and region.

Ofgem said competition among suppliers for prepayment customers is less developed than for those who pay by direct debit, cash or cheque, meaning there are fewer tariffs available and those that are available are generally more expensive.

Customers with prepayment meters are also more likely to be in vulnerable circumstances than those paying by other means.

The cap is due to expire at the end of 2020 when the roll out of smart meters is completed, which will help prepayment meter customers in particular access better deals.

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.”