Pre-paid energy bills to rise as competition watchdog increases cap

Vulnerable energy customers face paying more for pre-payment gas and electricity meters after the competition watchdog confirmed plans to raise a price cap by roughly £1 a week.

The Competition and Markets Authority said on Wednesday it had recommended to the energy regulator that the pre-payment price cap — which protects vulnerable customers who pay for their energy on pre-payment meters — should continue beyond 2020.

But the watchdog said the original cap had been set too low when it was set in 2016. The CMA said it had decided to raise the ceiling after reviewing a recent price cap for default energy tariff customers set by the energy regulator, Ofgem.

The pre-payment cap was due to end in 2020 due to the rollout of smart meters — a way to monitor energy usage in the home — but the CMA said Ofgem should continue to protect customers with the cap as the rollout of smart meters is unlikely to have been completed by that time.

Energy prices for more than 4m British households were capped in 2017 when Ofgem limited the bills customers on pre-pay meters paid. It was one of the measures recommended by the CMA in response to its two-year probe in to the retail energy market, which found that poorer households were not benefiting as much from competition in the pre-pay market.

In November last year Ofgem introduced a price gap for customers on default tariffs, starting from 1 January. However around 15m UK households saw bills rise in April when the regulator revised up the cap driven by a rise in wholesale energy costs.

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The CMA said: “A price cap set too low may lead to suppliers leaving the market, reducing both competition and consumer choice. Even with revised level of the price cap, pre-payment customers will still be protected from unnecessarily high prices.”

The change is set to come into effect on October 1, 2019.



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