From 1 April 2024 the Energy Price Guarantee (EPG) approach to prepayment costs was replaced by the non-volumetric payment levelisation scheme, the Retail Energy Code Company (RECCo) has confirmed. The scheme, which RECCo says launched successfully on that date, requires suppliers to raise direct debit charges and reduce prepayment meter rates so that both groups pay the same standing charge under the price cap1.
Historically, prepayment meter customers paid more for their energy than those paying by direct debit. The EPG, announced by the Chancellor in March 2023, initially equalised costs by giving prepayment users a discount on their unit rates. RECCo states that from 1 April 2024 this approach was replaced by the levelisation scheme1.
"This scheme equalises tariffs by requiring energy suppliers to increase direct debit customers' charges while reducing prepayment meter users' rates."
Because each supplier holds a different mix of payment methods, a reconciliation mechanism credits suppliers with more prepayment customers than average and debits those with fewer. Ofgem confirmed in February 2024 that measures would be introduced so prepayment and direct debit customers under the price cap pay the same standing charge, and appointed RECCo as reconciliation operator in October 2023, confirming the role in February 20241.
| Item | Detail |
|---|---|
| Scheme start | 1 April 20241 |
| Replaced | EPG prepayment unit rate discount1 |
| Mechanism | Direct debit charges raised, prepayment rates reduced1 |
| Reconciliation | Credits for suppliers with above-average prepayment share, debits for those below1 |
| Data snapshot | Midday on the 1st of each calendar month2 |
| Data submission deadline | By the 15th calendar day of the month2 |
| Invoice issued | 15 working days after data submission2 |
| Supplier payment deadline | Within 10 working days of acceptance2 |
RECCo has announced an updated methodology, introducing a distinction between single-register and multi-register metering assets. It says the updated methodology applies to all reconciliations from January 2025 onwards and retrospectively covers reconciliations back to April 20241.
Why it matters for households
The change moves the cost of the prepayment premium onto direct debit customers rather than removing it from the system. Households on prepayment and pay as you go tariffs should see their rates reduced relative to what the EPG discount produced, while direct debit households absorb part of that difference through higher charges. The Energy Price Guarantee itself is a closed scheme, and the levelisation mechanism now sits alongside the price cap as the route by which payment method costs are equalised.
For a household's energy independence, the practical effect is that the gap between what a prepayment meter costs and what a direct debit account costs is narrowed by design rather than by the household's own choices. The scheme also carries weight for prepayment meters and vulnerable customer protections, since prepayment users include a high proportion of disabled, chronically ill and low-income customers, according to Ofgem's Melissa Giordano2. RECCo says the scheme aims to alleviate the burden on vulnerable consumers and contribute to tackling fuel poverty1.
What happens next
The updated methodology took effect for reconciliations from January 2025, with retrospective application to reconciliations dating back to April 20241. RECCo has not reported any further changes to the scheme beyond that update.
Sources2 cited
- RECCo Announces Successful Update to the Levelisation Scheme Methodology - The Retail Energy Code Company, retailenergycode.co.uk
- Your guide to Prepayment Levelisation - The Retail Energy Code Company, retailenergycode.co.uk