Average bills for prepayment meters covered by the energy price cap were set to climb from £1,309 to £2,017 in April 2022, according to Which?1. The increase followed a decision by the energy regulator Ofgem to raise the price cap by 54 per cent from 1 April 2022, which Which? attributed to high wholesale energy prices1.
Prepayment meters are covered by the price cap, meaning the unit rate charged on these tariffs cannot exceed the figure set by Ofgem1. Around four million homes in England, Scotland and Wales have a prepayment meter, and in Northern Ireland prepaid meters are one of the most common ways of paying for electricity and gas1. Prepayment tariffs tend to be higher than those paid by direct debit, and almost all companies offer a discount for paying by direct debit1.
"Prepayment meters are covered by the price cap, with average bills set to climb from £1,309 to £2,017 in April 2022."
The £2,017 figure is an average for prepayment customers covered by the cap, not a fixed charge for every household. Under the cap, suppliers cannot charge more than the capped amount for the combination of standing charge and unit rate, but how they split the balance between the two is up to them1. The standing charge is a fixed daily or monthly amount paid regardless of how much fuel is used, and on a price-capped variable tariff it counts as part of the price-capped amount1. Which? reported that £0 standing charges had been offered by some suppliers in the past but were no longer available in the market at the time of writing1.
| Payment method | Position under the price cap, April 2022 |
|---|---|
| Prepayment | Covered by the cap; average bills set to rise from £1,309 to £2,0171 |
| Direct debit | Almost all companies offer a discount for paying this way1 |
| Variable tariff | Protected by the cap; no exit fees to leave1 |
| Fixed-rate tariff | Unit rate and standing charge fixed for the term, typically one to two years; some carry exit fees1 |
Which? also noted that variable tariffs, traditionally the most expensive option, had become almost universally the cheapest on the market because of the ongoing energy crisis1. Customers on a variable tariff must be given 30 days' notice of any change to standing charge or unit rate, and can leave without paying exit fees1. On fixed-rate tariffs, customers can switch provider in the last 49 days of their contract without paying exit fees1.
Why it matters for households
For a household on a prepayment meter, the April 2022 change meant the average annual bill under the cap rose by £708, from £1,309 to £2,0171. Because prepayment customers pay for energy before using it, through a key, card or in some cases a smartphone app, a higher cap translates directly into more money needed on the meter to keep supply running1. Prepayment tariffs also tend to be higher than direct debit rates, and the direct debit discount offered by almost all companies is not available on this payment method1.
The cap limits what can be charged for the combination of standing charge and unit rate, but it does not limit the total bill: a household that uses more energy pays more, and one that uses less pays less1. For a home's energy independence, the practical effect is that the cost of each unit of gas or electricity consumed on a prepayment meter rose, while the fixed daily charge applies whether or not any fuel is used1. Which? reported that standing charges cover suppliers' network maintenance costs and other elements including government levies and grants such as the Warm Home Discount1.
What happens next
No further dated steps for prepayment bills beyond the 1 April 2022 increase are set out in the source1.
Sources1 cited
- How to understand your energy bill - Which?, which.co.uk