Ofgem published a statutory consultation on 1 November 2023 proposing to levelise standing charges so that prepayment meter (PPM) customers and direct debit customers pay the same daily charge1. The regulator describes the proposal as an enduring solution that would "levelise" these standing charges to coincide with the end of temporary government support1.
Under the proposals, PPM customers would save around £50 a year and standard credit customers, who pay on receipt of a monthly or quarterly bill for the exact amount of energy used, would see bills fall by around £45 a year, while direct debit customers would pay around £20 a year more1. The consultation also sets out proposals to share the costs of bad debt more equally across customers, to reduce the premium paid by standard credit customers1.
The change addresses what the consultation calls the "PPM premium". Previously, customers on prepayment have been charged more than those who pay by direct debit to cover the additional costs and resources required by suppliers to provide their services1. In October 2022, the government introduced measures to temporarily remove this premium via the Energy Price Guarantee, which remains in place until April 20241.
"A Statutory Consultation on levelling standing charges for prepayment meter and direct debit customers so customers pay the same daily charge has been published today."
The consultation follows the launch of a wider conversation on the issue of standing charges and how they should be set, which had already attracted a high number of responses in its first week1. It also references the Winter 2023 Voluntary Debt Commitment recently announced by Energy UK and Citizens Advice1.
| Payment method | Proposed annual effect |
|---|---|
| Prepayment | Save around £50 |
| Standard credit | Save around £45 |
| Direct debit | Pay around £20 more |
Why it matters for households
Standing charges are the fixed daily amount a household pays whatever its energy use, so they shape the cost of a home's energy independence as much as unit rates do. For prepayment households, the premium has meant paying more for the same supply, and the consultation's figures show the scale of that difference: around £50 a year. For direct debit households, the same proposals would mean paying around £20 a year more, because the costs currently loaded onto prepayment and standard credit customers would be spread more evenly. The treatment of bad debt costs matters too, since those costs are currently recovered unevenly across payment methods. The consultation does not set out how individual suppliers would apply any change, and no decision has been reported.
What happens next
The next quarterly price cap announcement will be made in February 2024, covering April to June 20241. The government's Energy Price Guarantee measures that temporarily removed the prepayment premium remain in place until April 20241.
Sources1 cited
- [](https://epvs.co.uk/feed/), epvs.co.uk