Ofgem started reviewing ways to permanently remove the "premium" on prepayment meter prices from April 2024, according to Age UK's guidance on types of energy meters1. The review concerns the longstanding practice of charging households on prepayment meters more per unit of energy than those paying by direct debit.
The premium was suspended earlier. Age UK states that "from 1 July 2023, households with prepayment meters won't be charged more for their energy"1. That measure was temporary, and the regulator's work from April 2024 examines how the gap could be closed on a lasting basis1.
"From April 2024, Ofgem are reviewing ways to permanently remove the 'premium' on prepayment meter prices."
Age UK notes that "there's a price cap on most standard variable prepayment tariffs"1, so prepayment customers remain covered by the price cap even while the premium question is unresolved. The same guidance states that "you shouldn't have to pay to have a prepayment meter installed"1, though it adds that "some suppliers have conditions, for example, that you have a current account or have been debt free for at least 3 months"1.
Separately, Age UK sets out compensation for customers whose meters were wrongly installed. It says customers "identified as having had a prepayment meter wrongly installed to recover energy debt, or where processes were not followed adequately by their energy supplier, between 1 January 2022 and 31 January 2023 will be due compensation (dependent on the level of detriment)"1. Affected customers "of the eight suppliers involved in the review will be contacted directly by their supplier and compensation should be paid automatically"1.
| Item | Detail as reported |
|---|---|
| Premium suspended | From 1 July 2023, prepayment households not charged more1 |
| Permanent removal under review | From April 20241 |
| Compensation window | 1 January 2022 to 31 January 20231 |
| Suppliers involved in compensation review | Eight1 |
Why it matters for households
A prepayment premium means the same units of gas or electricity cost more when paid for in advance through a meter than by direct debit. Removing it permanently would narrow the running cost gap between the two payment methods, which matters for homes where prepayment is the only practical option. The price cap rates by payment method set out how those differences are structured.
For a household's energy independence, the premium is a fixed disadvantage attached to a payment method rather than to how much energy is used. It cannot be offset by using less. The temporary suspension from July 2023 removed that disadvantage for a period; a permanent removal would settle it. Until the review concludes, the position reported is that the premium is not being charged, but the longer term arrangement has not been finalised1.
Prepayment customers also face risks that direct debit customers do not, including self-disconnection when credit runs out and repaying energy debt through the meter. Age UK notes that "your supplier should offer you emergency credit wherever possible"1, and the site's guide to emergency credit explains how that works. Rules on involuntary installations and on whether a smart meter can be switched to prepay without consent sit alongside the pricing question.
What happens next
No outcome or timetable for the review has been reported. Age UK's guidance does not state when Ofgem expects to conclude, what options are being considered, or whether the suspension will be extended if the review runs past its current end date1. The compensation process for wrongly installed meters is separate: eligible customers are to be contacted by their supplier, with payment made automatically1.
Sources1 cited
- Types of energy meters explained | Age UK, ageuk.org.uk