CMA pushes price cap for prepayment meters

Electricity meterThe Competition and Markets Authority (CMA) has proposed a price cap on prepayment meters to protect vulnerable customers from expensive tariffs.

A new CMA report proposes to introduce a price cap for energy customers on a prepayment plan to “address domestic customer detriment” for those who are least able to afford inflated prices.

The report read: “We have provisionally concluded that a price cap should apply to domestic customers on prepayment meters for a transitional period (2017 to the end of 2020).

“The proposed level of the cap as of Q2 2015 is generally in line with the cheapest prepayment tariff prices in many regions and we believe that it will be possible for competitive tariffs to undercut the level of the cap.

“Had it applied in Q2 2015, it would have reduced prepayment customer detriment – and, equivalently, the revenues of the Six Large Energy Firms – by about £300 million per year, equivalent to a reduction in the average bills paid by prepayment customers of over 8%.”

Bill Bullen, MD, Utilita Energy – the UK leading smart prepayment supplier – welcomed the proposed CMA remedies.

A spokesperson said: “We welcome the recognition by the CMA that more needs to be done to ensure [prepayment customers] have access to the quality offers and support they need.

“Our price commitment has always been to work to be cheaper than the Big Six for our prepayment customers – dual fuel and variable tariffs. We continue to believe that this is right for us and our customers.

“We agree with the CMA that Smart rollout is vital for these customers, and the best protection for them – we have led the way in this area, installing smart meters for all our customers free of charge.

“We are encouraged at the proposed recommendations to remove some of the restrictions on tariffs – it will be essential to make sure all the barriers to independent suppliers innovating for the benefit of prepayment customers are removed.

“We will work with Ofgem and the CMA to implement these measures to the benefit of prepayment customers.”

Pixie Energy

Pixie logo Pixie Energy is an incubator and a facilitator of strategic research and project work, focusing on energy regulation, policy and markets at the local and national level. Find out more about Pixie Energy here.

Local Energy Matters: Scotland

Local Energy Matters: Scotland is a free-to-download brochure with a focus on energy tariffs in the two Scottish electricity distribution regions, as well news on local energy and low-carbon schemes.

Previous editions can be download here.

Scottish energy market overview

You can read an overview of the Scottish energy market here.

Scottish Government energy feed