Chancellor Jeremy Hunt has said that extra costs for prepayment energy customers will be scrapped from July, saving more than four million households about £45 a year on their energy bills.

Households with prepayment meters are typically on low incomes, with many people switched to this type of energy meter after falling into arrears with energy payments.

Energy firms say it costs more to maintain prepayment meters and charge customers this way – so they pass the extra costs onto customers.

Hunt said: “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.”

The Treasury estimates the change will cost the taxpayer £200m.

Prepayment controversy

Prepayment meters have come under intense scrutiny in recent months after it was revealed that some energy suppliers were breaking into the homes of vulnerable customers to install the meters.

Energy suppliers were forced to halt forced prepayment meter installations last month after the regulator Ofgem said it needed to clarify rules and guidance in this area.

Suppliers subsequently agreed to stop installation by warrant, remote switches without the explicit agreement from the customer, and cease new applications to court for installation warrants, unless theft is suspected.

It is also predicted that the Government will include an announcement that the Energy Price Guarantee will remain at £2,500 from April and not rise to £3,000 a year as planned.