The temporary cap was one of the Competition and Market Authority’s (CMA) suggestions following its two year investigation of the energy market.

The levels of the cap vary for electricity and gas, by meter type and region.

The cap comes into force from 1 April 2017. It is due to expire at the end of 2020 when the roll out of smart meters is set to be completed, which will help prepayment meter customers in particular access better deals.

The CMA probe found competition among suppliers for prepayment customers is less developed than for those who pay by direct debit, cash or cheque. This means there are fewer tariffs available to these customers and the tariffs that are available are generally more expensive.

Customers with prepayment meters are also more likely to be in vulnerable circumstances than those paying by other means.

Dermot Nolan, chief executive of Ofgem, said: “We want all consumers to enjoy the benefits of a more competitive energy market, regardless of their circumstances. Customers who prepay for their energy are denied the best deals on the market available to those using other payment methods. They are also more likely to be in vulnerable circumstances, including fuel poverty. This temporary cap will protect these households as we work to deliver a more competitive, fairer and smarter market for all consumers.”