The prepayment price cap

The music has stopped, the results are in, how did they land?

Last year the Competition and Markets Authority (CMA) completed their two year investigation into the UK domestic energy market amongst the remedies suggested. The CMA introduced the idea of a price cap for prepayment meter (PPM) customers. I am sure most of you will know that PPM customers have been paying disproportionately high rates for their Gas and Electricity for a number of years now (up to 45% more than the cheapest energy tariffs available). The move has been welcomed by amongst others, the Citizens Advice

The price cap comes into effect tomorrow (1st April 2017) and will run until at least 2020 when the proposed Smart meter roll out is due to be completed. What this means is that all energy companies offering PPM tariffs now have their new rates in place. There will be a review of rates every six months and no doubt some tariffs will be ‘adjusted’ at these points, however for now, we can get a really clear view on the market and the position of suppliers.

Today there are 27 PPM tariffs available from 22 different suppliers. 5 are Fixed price and range from £985.81 – £1038.98 per year for Ofgem average usage in the NORWEB region (3100kwh Electricity & 12500 Gas). That’s a differential of just £53.17 between best and worst. For Standard Variable PPM tariffs (SVT’s) for the same usage there’s a broader choice, 22 tariffs from 20 suppliers and a price range of £1021.70 – £1154.36, a differential of £132.66. The market has narrowed significantly. For equivalent usage in the credit market tariffs range from £830.09 – £1404.79 an enormous £574.70 differential between best and worst!

So, is the price cap a good thing? Well, the cap will definitely benefit those more vulnerable and lower income customers. It also means for the first time in the 5 years I have been reviewing energy tariffs, in many cases, it is now cheaper to pay for your gas and electricity with a PPM on a SVT than it is for the equivalent SVT on a billed meter.

Have you looked at your energy costs recently? Are you on a PPM? If you haven’t reviewed your energy prices this year then I would advise you to urgently complete a free price comparison and find yourself a better deal, at least you know it is unlikely to change for at least the next six months.

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Leigh Fairbrother

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