Ofgem cap to save pre-payment customers £320 Million a year
Ofgem announce cap for pre-payment customers
Ofgem today announced the levels of the Prepayment cap coming into effect in April 2017. Ofgem has predicted that this cap will save customers 10-15% from April 1st later this year, or about £80 per year for an average household.
The cap varies from region to region, and is different for gas and electricity, so the actual saving will depend on a variety of factors.
The cap is being implemented as a response to the Competition and Market Authority’s (CMA) investigation into the energy market. The investigation found that competition among suppliers for customers on prepayment tariffs is underdeveloped compared to tariffs being paid for by direct debit and cash or cheque.
As a result there are less tariffs for customers to choose from, and the limited options that do exist tend to be more expensive than other methods. Customers on prepayment tariffs are also more likely to be vulnerable.
The cap will apply to 4 million households across the UK, and will last until the end of 2020, by which time the smart meter rollout is expected to be completed. Smart meters will give customers more options and enable them to take advantage of supplier competition.
Gillian Guy, of Citizens Advice, said: "This cap should stop some of the poorest households paying over the odds to heat and light their homes.
"It will help millions save money but action shouldn't stop there."
Mark Todd of energy helpline has commented:
Today’s announcement of a price cap for prepayment customers gives them at last some protection from exploitative pricing. Prepayment customers have paid very high rates for too long. However, the 90% of customers not on prepayment remain exposed to having their inertia exploited by expensive standard prices. For most Britons, there is no legal protection against being ripped off on your energy bills. Don’t switch and you’re likely to be exploited.