Households with prepayment meters are no longer charged more for their energy than customers paying by direct debit, under a change that took effect on 1 July 20231. The change applies to the unit rates and standing charges set under the price cap on most standard variable prepayment tariffs1.
Age UK, which sets out the position in its guidance on meter types, states the change plainly:
"from 1 July 2023, households with prepayment meters won't be charged more for their energy"
The same guidance records that the work is not finished. It says that from April 2024, Ofgem is reviewing ways to permanently remove the "premium" on prepayment meter prices1. No further detail on the scope, timing or outcome of that review is given in the source, and no figures for the size of the premium before 1 July 2023, or for the saving to a typical prepayment household, appear in it.
The change sits alongside separate work on how prepayment meters were used to recover debt. Customers identified as having had a prepayment meter wrongly installed to recover energy debt, or where processes were not followed adequately by their supplier, between 1 January 2022 and 31 January 2023 will be due compensation, dependent on the level of detriment1. Affected customers of the eight suppliers involved in the review will be contacted directly by their supplier, and compensation should be paid automatically1.
Prepayment customers top up using a key or card, which can be loaded with money at local shops1. Suppliers should offer emergency credit wherever possible, and there should be no charge for having a prepayment meter installed1. Some suppliers attach conditions to the tariff, for example that the customer holds a current account or has been debt free for at least three months1.
| Item | Position |
|---|---|
| Prepayment premium | Ended 1 July 20231 |
| Ofgem review of permanent removal | From April 20241 |
| Compensation window for wrongly installed meters | 1 January 2022 to 31 January 20231 |
| Suppliers involved in the review | Eight1 |
Why it matters for households
For a household on a prepayment meter, the amount paid for each unit of gas or electricity, and the daily standing charge, now follow the same structure as for direct debit customers under the cap1. That removes a gap that previously meant the same consumption cost more depending on how the bill was paid. The practical effect on a home's energy independence is limited but real: the payment method no longer carries a price penalty, so the choice between paying in advance and paying by direct debit turns on budgeting and cash flow rather than on a higher rate. Prepayment still requires money to be on the meter before energy is used, and emergency credit remains the fallback when the balance runs out1. The separate compensation process concerns meters installed to recover debt in a defined window, and payment is described as automatic for those affected1.
What happens next
Ofgem's review of ways to permanently remove the prepayment premium is recorded as running from April 20241. The source does not state when that review will conclude or what it will recommend. Compensation for customers affected by the debt-recovery cases is to be paid automatically, with suppliers contacting those customers directly1.
Sources1 cited
- Types of energy meters explained | Age UK, ageuk.org.uk