There was a sudden upheaval in the energy market with five of the Big Six gas and electricity suppliers announcing price rises and a few other independent suppliers walking the same path. As the price rise was made in Standard Variable Tariffs and two third of the Big Six energy customers are on this tariff, the government and energy regulator were concerned about the big mass that was being affected by this step. They even threatened to intervenein the energy market in order to help people make savings on energy bills. As most of the SVTs are not into home energy price comparison and are loyal to their suppliers, they suffer the most from price hikes.
To help these energy customers, government was planning to announce an energy cap for all customers but somehow that entire wave fizzled out. However, there was a suggestion on capping the prepayment meter customers, which are around four million in number. As they live on cheapest home energy plans, it is ideal to consider them for capping. Therefore, a temporary price cap has come into effect especially for the pre payment customers. This recommendation was given by the Competition and Markets Authority (CMA) after an elaborate two year research on the energy market. The CMA reported that energy customers living on prepayment meters had lesser choices for energy tariffs and often suffers from disproportionate energy bills.
By applying an energy cap, the CMA and other government authorities are helping them out so that they can enjoy the cheapest energy prices. The price cap would deduct around £80 a year from an average energy bill and would prove profitable for the home energy plans of the pre payment customers. It will also help the prepayment customers to access cheaper home energy deals, normally available to people who choose other modes of payment like direct debit. The plan is to keep this energy cap intact until 2020, when the smart meter installation in the entire UK would be finished. Then every home will have a smart meter, which would send accurate energy readings to the supplier giving no chance for wrong or estimated bills. It is expected that smart meters would reduce energy wastage and bring in the cheapest energy prices once they are set in every home.
Andrea Coscelli, Acting Chief Executive of the CMA spoke on the topic by saying that “Households across the UK deserve to get a fair deal on their energy bills. On top of a number of measures to get competition working better, the CMA’s prepayment meter price cap means that more than four million consumers, many of whom are vulnerable and who can’t easily shop around for a better deal, will see their bills cut by around £8- a year each, saving British customers a total of £320 million per year.”
Summary: Temporary energy cap on pre payment customers has come into effect from April 2017. It would ensure that these customers save money on their energy bills and can access cheaper energy deals available to customer who choose other modes of payment like direct debit.