Martin Lewis hails 'staggering' change to energy bills for millions of pre-pay customers

Martin Lewis has hailed a “gobsmacking” change to energy bills for Britain’s four million prepayment meter customers.

The consumer champion and founder of Money Saving Expert said prepayment meters are set to be the cheapest option “for the first time”.

Ofgem’s announcement that the price cap for a typical dual-fuel household will be lowered from £1,928 to £1,690 dominated headlines on Friday.

However, the regulator also announced plans that will stop prepayment customers - who tend to be on lower incomes - having to pay more for standing charges, which are the fixed daily amounts people pay for having access to energy, even if they don’t use it.

Historically, those on prepayment meters have paid higher standing charges than direct debit customers, reflecting the higher cost to serve these households.

But under the new scheme, prepayment households will pay the same for standing charges as those on direct debit tariffs - with Lewis saying this will make the overall cost of prepayment meters cheaper.

'Cheapest way to pay'

He told ITV's Good Morning Britain programme: “This is the big change hidden under the figures. For the first time, prepayment will probably be the cheapest way to pay.

“They [Ofgem] have equalised the standing charges on prepayment and direct debit, and unit rates on prepayment are cheaper, so from 1 April if you are on the price cap - which the vast majority of homes in England, Scotland and Wales are - prepayment will be typically 3% cheaper than paying by direct debit.

“I’ve been lobbying about prepayment costs for years - most of the most vulnerable in the country are on prepayment - so the fact prepayment is now going to be cheaper is absolutely gobsmacking.”

Fuel poverty charity National Energy Action has also welcomed the development, saying prepayment meter households are more likely to be among the six million it estimates are in fuel poverty (which the charity defines as needing to spend 10% or more of income on energy in order to maintain satisfactory heating).

Is it time to switch to a prepayment meter?

Lewis said he would "urge caution" and that it depends on the household.

Consumer champion organisation Which? has said more competitive energy deals for direct debit customers are likely to become available in the coming months.

And Lewis advised: "If and when market competition comes back, most of the cheapest deals are on direct debit.

"So I suspect the pattern we’re going to have in the future is if you’re a switcher who moves tariffs, you should be on direct debit because that’s where the cheapest deals come, and you will make the biggest savings."

But he added: "If you’re not going to switch, perversely [after] what we’ve been saying for the past 10 to 15 years, prepayment meters are now going to be the cheapest route for you."

Read more

• When will the cost of living crisis end? (Yahoo News UK)

• Martin Lewis reveals five things you need to know as Ofgem announces new energy price cap (The Independent)

• Hopes rise for rate cuts as energy price cap falls by £238 (The Telegraph)