Ofgem confirmed on 1 February 2024 that standing charges will be made level from 1 April 2024, removing the prepayment meter premium, and accepted REC Change Proposal R0147, which gives effect to a new Retail Energy Code schedule and a reconciliation scheme to be operated by the Retail Energy Code Company (RECCo)1. The change means prepayment meter customers and direct debit customers under the price cap pay the same standing charge1.
RECCo, which Ofgem selected as scheme operator in October 2023, said the scheme was launched on 1 April 20241. It described the mechanism as a non-volumetric payment levelisation scheme, under which suppliers charge direct debit customers more while discounting prepayment meter tariffs, with a reconciliation method to account for differing payment method splits between supplier portfolios2. Under that method, suppliers with more than average prepayment customers can be credited, and those with fewer than average debited2.
"Today, Ofgem confirmed that from 1st April 2024 standing charges will be made level, removing the prepayment meter premium."
Ofgem's decision document stated that RECCo was selected as delivery partner and reconciliation operator because it already operated on a dual fuel basis and could work at risk with industry, and that initial cost estimations suggested it could carry out both roles in the most cost-effective manner1. RECCo said the scheme replaced an earlier approach under which the Energy Price Guarantee, announced by the Chancellor in March 2023, aligned costs by giving prepayment customers a unit rate discount2.
| Item | Detail |
|---|---|
| Confirmation date | 1 February 20241 |
| Levelisation start | 1 April 20241 |
| Scheme operator | RECCo, selected October 20231 |
| Change proposal | R0147, accepted by Ofgem1 |
| Data snapshot | Midday on the 1st of each calendar month2 |
| Data submission deadline | 15th calendar day of the month2 |
| Invoicing | 15 working days after data submission2 |
| Supplier payment deadline | 10 working days from acceptance of invoice2 |
Why it matters for households
Prepayment meter customers have historically paid more for their energy than those who pay by direct debit1. From 1 April 2024 the standing charge element of the price cap is the same for both payment methods, so the gap on that fixed daily charge closes1. Standing charges are the fixed daily amount paid regardless of how much energy a home uses, so the change affects the cost of having a supply rather than the cost per unit consumed. For a household on a prepayment meter, the practical effect is that the daily fixed charge no longer carries a payment method premium, while the unit rate and overall bill still depend on usage and on the tariff held. The reconciliation scheme behind the change moves money between suppliers rather than between customers directly, so a household's bill reflects its own supplier's tariff, not the credit or debit position of that supplier in the scheme2.
What happens next
RECCo hosted a webinar on 14 March 2024, before the 1 April start, covering the reconciliation scheme and data reporting requirements1. The scheme went live on 1 April 20242. Suppliers are required to snapshot their data at midday on the first day of each calendar month and submit it to the REC Code Manager by the 15th calendar day, with invoices issued 15 working days after submission and payment expected within 10 working days of acceptance2. No further dated steps beyond these have been reported.
Sources2 cited
- Ofgem gives Standing Charge levelisation the green light - The Retail Energy Code Company, retailenergycode.co.uk
- Your guide to Prepayment Levelisation - The Retail Energy Code Company, retailenergycode.co.uk