Do I pay more with a prepayment meter?

Do I pay more with a prepayment meter?

We have been asked several times if people pay more for gas and electricity when using prepayment meters. The short answer is “No, they don’t”, but please read further for more information…

In the past people who pay for their energy using a prepayment meter have paid more for standing charges than people who pay by Direct Debit. This is because it costs energy suppliers more to get electricity and gas to those on a prepayment meter. 

Ofgem, the energy regulator, plans to balance standing charges between prepayment and Direct Debit payment methods. This will mean that people who pay using a prepayment meter do not pay more than other payment methods. Previously the ‘PPM premium’ was removed by UK government support through the Energy Price Guarantee but this support will end on 1 April 2024. Ofgem have made changes to the price cap that is a lasting solution, which must be funded by energy bill payers rather than tax payers. 

People with a prepayment meter will continue to be supported so that their standing charges are no more than Direct Debit standing charges. People on a prepayment meter who get their electricity and gas from the same supplier will save around £49 per year (£52 including VAT), but people who pay by Direct Debit will pay an extra £10 per year. 

Covering debt costs 

Ofgem are also allowing a one-off extra payment of £28 per year (£2.33 per month) to make sure suppliers have sufficient funds to support customers who are struggling. This will be added to bills of people who pay for their energy by Direct Debit or standing credit. The temporary payment is partly offset by the end of an allowance worth £11 per year that covered debt costs related to the COVID pandemic. 

Conclusion

In conclusion, while prepayment meter users historically paid more for standing charges, recent regulatory changes aim to balance these costs. Ofgem’s interventions ensure fairness in energy pricing, benefiting prepayment customers by aligning their standing charges with Direct Debit users.