Households on prepayment meters are set to see their energy bills drop as extra costs on the pay-as-you-go meters are scrapped from July.
Chancellor Jeremy Hunt confirmed that the "prepayment premium" will be coming to an end, meaning that more than four million households affected will save around £45 a year on their energy costs. Those on prepayment meters, typically vulnerable or low income households, currently pay more on average than direct debit customers due to firms managing the meters passing costs down.
The change is expected to come into effect from July 1, with the Chancellor set to announce the plans in his Spring Budget as part of reforms to the Government's Energy Price Guarantee. The guarantee, which currently caps the average household energy bill at £2,500 a year amid the cost of living crisis, was due to increase by £500 next month to £3,000.
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However, it's thought that the planned price hike could be scrapped amid pressure from fuel poverty campaigners. The Energy Bills Support Scheme (EBSS), which has given the majority of households £66 or £67 a month off their energy bills since October, is also due to come to an end this month.
Despite no official word from the Treasury, money expert Martin Lewis, who wrote to Jeremy Hunt with the support of over 110 charities calling on the Government to ditch the £500 increase, said he is "90% certain" that the price hike will not go ahead. However, he raised concerns that struggling households will still feel the pinch as the EBSS comes to an end.
Martin said: "The real big impact is the end of the £67 a month payments, which of course proportionately helped lower users far more." His MoneySavingExpert website has a calculator tool for households to work out how much they are likely to pay from April after the changes.
Jeremy Hunt said of plans to scrap the 'prepayment premium' from July: "It is clearly unfair that those on prepayment meters pay more than others. We are going to put an end to that.
"From July four million households won’t pay more than those on direct debits. We've already cut energy bills by almost half this winter, and this latest reform is proof again that we’re always on the side of families."
It comes as the forced installation of prepayment meters is due to come to an end on March 31, after Ofgem asked all suppliers to pause installations in a bid to protect vulnerable customers. An investigation by The Times revealed how vulnerable customers – including disabled and mentally ill people – were being forced by British Gas on to the pay-as-you-go meters, or have their gas switched off.
Read more about your rights if you have had a prepayment meter fitted against your will here.
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