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Vulnerable pre-pay meter customers to benefit from price cap

Paloma Kubiak
Written By:
Paloma Kubiak
Posted:
Updated:
03/08/2016

Millions of pre-payment meter customers could save around £75 a year after the energy regulator said it will push ahead with plans to introduce an interim price cap.

Four million vulnerable pre-payment meter customers would benefit from the price cap, which Ofgem wants in place from April 2017 until 2020 when the roll-out of smart meters is expected to be near completion.

The energy regulator said it will implement remedies first outlined in the Competition and Markets Authority investigation into the industry which was published last month.

It found that two thirds of households are ‘disengaged’ and paying over the odds for their energy via expensive standard variable tariffs compared to those who have switched tariff.

In a bid to increase competition and cut bills, Ofgem will implement the price cap – though no single price limit has been set as this will be in line with the cheapest pre-payment tariff in the region.

Ofgem said it will trial more effective prompts on customers’ bills to encourage them to compare tariffs and next year, it will also pilot a database service to allow suppliers to offer disengaged customers better value deals.

Mark Todd, co-founder of energyhelpline, said: “Ofgem has today announced the latest saga in the tale of the disengaged energy customer. It doesn’t change the plot line for the majority of customers but the introduction of a price cap should help limit the unjustifiable cost of pre-payment metres for the most vulnerable.

“But where does this leave customers on standard meters? Still stuck on square one. As is Ofgem’s way, the onus still lays with the customer to be proactive and shop around to avoid being ripped off. Unfortunately, the average household only switches once every nine years, costing themselves roughly £300 a year or £3,000 over a decade.

“The token price cuts and poor customer service of the Big Six must be impetus enough for people to switch. If not, surely a typical saving of £300-£350 a year should help break the bonds of loyalty and encourage consumers to seek out fairer deals. It is clearly up to them to hold suppliers to account and vote with their feet. Switching is the only way to save when it comes to energy.”