Spring Budget: more than four million UK households to pay less on energy bills from July

Prepayment meter customers will no longer be charged more for energy under plans to announced in the spring Budget.

Chancellor Jeremy Hunt is ending the “prepayment premium” from July in a move that will save four million households £45 a year on energy bills, the Treasury says.

Households placed on prepayment meters are typically on low incomes and end up paying more on average than those paying by direct debit.

This is because they do not allow households to access the cheapest energy tariffs - fixed-rate deals - which are only available to standard meter customers. They also continue to implement standing charges, even if you are not using any power.

But from July, the “penalty” which sees households with prepayment meters charged more than those on direct debit will end, cutting bills for more than four million households.

Hunt said: “It is clearly unfair that those on prepayment meters pay more than others. We are going to put an end to that.

“From July four million households won’t pay more than those on direct debits. We’ve already cut energy bills by almost half this winter, and this latest reform is proof again that we’re always on the side of families.”

The change is expected to take effect from 1 July through updates to the Energy Price Guarantee. The Treasury estimates the change will cost the taxpayer £200 million.

It comes after prepayment meters recently came into the spotlight after some energy suppliers were caught breaking into the homes of people struggling to pay their bills to forcibly install them.

Households using prepayment energy meters must pay for their electricity and gas in advance of using it to heat and power their homes. Once the credit has run out, households will be cut off from their energy supply. In some cases meters do offer emergency credit, but it is usually only a small amount of money.

An investigation by The Times revealed how vulnerable customers – including disabled and mentally ill people – were being forced by British Gas on to the pay-as-you-go meters, or have their gas switched off. Firms were subsequently banned from installing prepayment energy meters under warrant, but that moratorium is due to expire at the end of March.

Energy Secretary Grant Shapps said: “While actions I’ve pushed for have meant forced installations are on pause, warrants aren’t being waved through and Ofgem is toughening up its reviews, our changes will make sure families aren’t penalised simply for how they heat their home.”

Meanwhile, the Chancellor is also expected to cancel a planned £500 hike in average energy bills which was due to come into force from next month. It means that the average household bill could stay at around £2,500, instead of rising to £3,000 as was previously announced.

Hunt has come under increasing pressure in recent weeks to cancel the rise, which was set to come into force from 1 April as the country grapples with the cost of living crisis.