Big six to hit millions of prepay energy customers with October price hike
The big six energy suppliers are to hit millions of prepayment customers with a near £50 price rise on average from next month, MoneySavingExpert.com can reveal.
We have obtained figures from the dominant energy providers that show all have now set their standard prepay tariffs within £1 of the new cap set by regulator Ofgem at £1,136/year for dual-fuel customers.
Last month, Ofgem announced it was increasing the prepayment price cap for the second time this year. The cap is designed to prevent suppliers from overcharging customers on poor value deals by placing an upper limit on how much they can charge, based on typical use.
We can reveal the big six have responded by hiking their prepay prices to just shy of the cap – meaning millions will have to shell out an average of £48 more a year from next month.
Combined with the earlier rise in April this year, up to five million prepayment and vulnerable customers who are seemingly protected by the cap will likely see energy bills increase by an average £100/yr+ in total.
To check if you can switch to a better deal and save £100s on your energy bill, see our Cheap Prepaid Energy guide.
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.
|Cheapest prepay deal (Bulb)||£977|
|Cheapest non-prepay deal (Outfox the Market)||£859|
|Ofgem price cap||£1,031||£1,089||£1,136|
|(i) Based on typical usage figures from Ofgem.|
'Is it really much protection at all?'
MoneySavingExpert.com deputy editor Guy Anker said: "The price cap for prepayment and vulnerable customers will be just £85/yr less than for someone paying by direct debit on the average big six variable tariff. Which begs the question – is it really much protection at all?
"For anyone with a prepayment meter, the best thing you can do is check to see if there's a cheaper deal out there for you – you could cut your bills by around £160/yr doing this. Better still, much bigger savings of some £275/yr are possible if you switch to a normal billed meter. Likewise, these typical savings apply if you're covered under the cap because you receive the Warm Home Discount, so check if you can save and vote with your feet."
Switch to a credit meter to save more
If you're on prepay, the best savings come from switching to a billed meter – letting you pay for your energy by monthly or quarterly direct debit, or quarterly cash or cheque.
There's much more choice for those on a billed meter, including opting for fixed tariffs, meaning potential savings are much higher. Currently, the cheapest billed meter tariff is a typical £118/yr less than the cheapest prepayment tariff, at £859/yr.
All of the big six (and some smaller suppliers) will switch you from prepay to a billed meter for free if you ask – though most require you to pass a credit check and have a good repayment history. See our Prepaid Gas and Electricity guide for more on how to switch.
I'm on a credit meter and my prices are capped – are my prices changing?
In addition to prepayment customers, those on credit meters who get the Warm Home Discount and are on their provider's standard tariff are also covered.
We've seen suppliers also announce an increase to these 'safeguard tariffs', which eligible customers were moved to when the cap was extended in February. Here's what the big six are doing from 1 October:
- British Gas – Rising from a typical £1,062/yr to £1,136/yr
- EDF – Rising from a typical £1,088/yr to £1,136/yr
- E.on – Rising from a typical £1,088/yr to £1,136/yr
- Npower – Rising from a typical £1,088/yr to £1,136/yr
- Scottish Power – Rising from a typical £1,088/yr to £1,136/yr
- SSE – Rising from a typical £1,088/yr to £1,135/yr
Again, to see if you can switch and save £100s/yr use our free Cheap Energy Club.