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CMA recommends extending prepay energy price cap

Written by: Emma Lunn
The competition watchdog also suggests upping the prepayment price cap by £1 a week.

The Competition and Markets Authority (CMA) has recommended that the energy regular Ofgem continue to protect prepayment energy customers from uncapped price increases.

A prepayment meter is a type of energy meter which enables households to pay for energy before they use it – usually by adding money to a key or smart card, which is then inserted into the meter. In theory prepayment meters can help people with budgeting, but prepayment tariffs tend to be more expensive than the cheapest deals on the market.

A prepayment price cap, restricting the unit rate and standing charge on prepayment tariffs, was put in place in 2017. The aim was to protect customers from high prices as a result of not being able to switch suppliers as easily as other customers.

The cap was only due to be in place until the end of 2020, when it was expected that the roll-out of smart meters would be complete and increased competition would lead to lower prices.

The CMA has now reviewed both the smart meter roll-out and the price cap and has made recommendations to Ofgem.

As the smart meter roll-out won’t be completed by 2020, it wants to see the prepayment price cap extended but also increased by about £1 a week from 1 October next year.

The CMA said the adjustment is necessary to keep the cap accurate in today’s market but that the cap would still protect customers from unnecessarily high prices. It said that if the price cap was set too low it may lead to suppliers leaving the market, reducing both competition and consumer choice.

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