Pre-Payment Meters: New Price Cap May Lift a Financial Burden

Ofgem aims to introduce a temporary price cap “safeguard tariff” to PPM customers.

Pre-Payment Meters: New Price Cap May Lift a Financial Burden

Pre-Payment Meters: New Price Cap May Lift a Financial Burden

Pre-payment meters (“PPMs”) are rarely the first choice of electricity users – not only can they be inconvenient, requiring “top ups”, but they are typically costlier than billed tariffs – on average £220 a year more, according to the BBC.

But that is changing, thanks to Ofgem’s aims to introduce a temporary price cap “safeguard tariff” to PPM customers. These plans will align PPM tariffs closer to factors that directly affect domestic energy prices, such as rises and dips in wholesale energy costs.

Ofgem says: “This is part of our programme to deliver a fairer, smarter and more competitive market for all consumers. The safeguard tariff applies to households who prepay for their energy, mostly with traditional coin or token operated prepayment meters*. These households are amongst those least able to benefit from competition and are more likely to be in vulnerable circumstances.”

Though this is a welcomed benefit for those on PPMs, those on billed tariffs may be shocked to learn that this means their standard tariff may now be costlier than a prepayment meter – to the tune of £1155** - or £107 a year more than a standard “Big Six” tariff.

Our response:

Ofgem should in put more effort in bringing down energy prices in general. In the meantime, consumers can already take steps themselves and switch to a new cheap deal to save money.

Ofgem also supports switching to save:

“Prepayment customers can still make further significant savings by switching to a cheaper tariff”.

The cap for PPMs will begin on 1 October 2017, and will save the average user £19 a year on average for electricity, reducing their tariff from £1067 to £1048. PPM gas tariffs will generally remain the same.  Being that Ofgem’s price reviews are every 6 months, this may once again change in spring 2018.

* According to Ofgem: “As of December 2015, there were 4.5 million prepayment electricity accounts and 3.5 million prepayment gas accounts, representing 17 per cent of all domestic electricity accounts and 15 per cent of all domestic gas accounts. Note that this does not equate to eight million individual households, as many of these accounts will relate to dual fuel customers with separate electricity and gas prepayment accounts.  Electricity prepayment customers with standard single rate meters and other types of other restricted meters are also included.”

** The £1,155 figure is the average cost of a Big Six supplier standard gas and electricity tariff, paid by monthly direct debit for an average usage home, taking into account the British Gas price rises that will come into effect from 15th September. Average usage is currently defined by the energy regulator Ofgem as 12,500 kWh of gas and 3,100 kWh of electricity per year.


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