How does the prepayment price cap work?
The price cap sets a maximum amount that suppliers can charge customers on the safeguard tariff in each region and for each meter type.
All customers who pay for their energy by topping up a prepayment meter are covered by the cap, in addition to those with a credit meter who receive the Government’s Warm Home Discount and are on a standard variable tariff – usually the most expensive deal a supplier offers.
At the beginning of the year it stood at £1,031/yr (on average and based on typical use), but was then raised to £1,089/yr on 1 April. From 1 October 2018, the level of the cap will jump again to £1,136/yr. Ofgem blames rising wholesale gas and electricity costs.
The cap is reviewed twice a year – with any changes taking effect in April and October – to reflect the estimated underlying cost of supplying energy.
Suppliers are pushing prepayment prices up
All the major providers are pricing their tariffs as high as they can without exceeding the cap’s limit.
Four of the big six suppliers – E.on, EDF, Npower and Scottish Power – have set their standard prepay tariff just a few pence below the cap, while British Gas and SSE is just £1/yr under the cap, based on typical use. Another big name, Co-op Energy, has set its price slightly lower, but it’s still only £7/yr below the limit.
For most of these providers, their standard tariff is the only prepayment option they offer – so if you’re with one of these, you’re likely overpaying.
We’re yet to hear how other big name suppliers such as First Utility, Ovo and prepay specialist Utilita will set prices, though based on their movements in April, the lowest we saw was £19/yr under the cap on average.
In comparison, the cheapest prepay deal on the market is from Bulb and costs a typical £977/yr – plus if you switch through MSE you’ll receive £25 cashback on top, pushing the savings to £185/yr against the new cap. Bulb also scored 90% ‘great’ in our latest customer service poll (from 293 votes). To find your cheapest deal, use our free Cheap Energy Club.