Martin Lewis said there will be a new “cheapest way” for households to pay their energy bills after a “staggering” turnaround for prepayment meter customers from Ofgem.
The energy regulator today announced the price cap would fall from £1,928 to £1,690 a year for a typical dual-fuel household paying by direct debits. However, Mr Lewis pointed out that the price cap will only fall by 12.3 per cent over a three-month period and the yearly fall is unknown.
On X, formerly known as Twitter, the financial journalist said "for every £100 paid used now you'd pay £87.70 from April”.
Households are expected to save around £20 a month thanks to this decision but Ofgem also revealed news that will leave prepayment customers paying a “cheaper” bill.
Do you have a money story you’d like to share? Get in touch by emailing money@gbnews.uk.
Mr Lewis shared the new 'cheaper' way to pay for energy bills going forward
GETTY
It confirmed the levelisation of standing charges to remove the “PPM premium” previously incurred by prepayment customers.
The money saving expert explained: “Prepay standing charges have been lowered to equalise them with Direct Debit, yet as prepay unit rates are cheaper, that means overall for a typical user from April, prepay will be about three per cent cheaper.
“The most vulnerable households often use prepayment meters and it has always been a rip off, so this is a staggering turn around.”
According to host of The Martin Lewis Money Show Live, some households could benefit from transitioning to a prepayment meter but this may not be the case for everyone.
Mr Lewis added: “Those on the price cap will see a saving by moving to a prepayment meter – yet that doesn’t necessarily mean everyone should switch to one.
“If and when proper competition returns there are rarely any prepay deals – firms mostly focus on winning new Direct Debit customers, so it is likely Direct Debit deals will be cheapest for those who switch and prepayment will be cheapest for those that don’t.”
Those on a prepayment meter are more likely to be on a lower income and are left vulnerable to the fluctuating changes to variable rates.
According to the regulator, these customers are “being charged more up-front for their energy” compared to their fixed tariff counterparts.
LATEST DEVELOPMENTS:
Prepayment customers are set to benefit from changes confirmed by Ofgem
GETTYAs of October 2022, the “PPM premium” was withdrawn through the Government’s Energy Price Guarantee.
However, with this support no longer in place, Ofgem appears to be tackling the issues affecting prepayment customers directly.
In his assessment of Ofgem’s decision, Mr Lewis described the price cap drop as an “improvement” for consumers and noted it could fall again in July.
The new energy price cap will come into effect from the beginning of April 2024.
