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Catherine Furze

Warning that prepay energy customers need to act soon to get new price cap prices

Families who are still using old-style prepayment meters may end up paying higher energy prices for longer then they need to unless they take action soon.

Prepayment rates are due to drop on July 1 under the new Ofgem price cap, set today, May 25, but households using the traditional pay-as-you-go meters won't see the benefit until after the first time they top up their meter after that date. Families who have a smart pay-as-you-go (PAYG) meter will see the new price updated on their meter automatically on July 1 so don't need to do anything.

Experts including Martin Lewis are advising people who have old-style PAYG meters to top up as little as possible before the new price cap kicks in, to ensure they start paying the new rate on the day it kicks in. This is because on many non-smart, prepay electricity meters, the rate change is not triggered until you top up. So if you have lots of credit on your meter, you will continue to pay the old - higher - rate until the day you top up, whenever that might be.

Read more: Energy bills set to drop as Ofgem announces new price cap of £2074

"Customers with those should be aiming to run their credit down towards the end of June, to have as little in on July 1 when prices get cheaper," said Martin. "Then top up on 1 July – even just a quid – so you’re then on the new lower rates."

Energy regulator Ofgem's new price cap, announced this morning, May 25, will see bills drop to £2,074 a year for a typical direct debit household. As that's 17% lower than the current Energy Price Guarantee (EPG) This means the EPG will fall away and almost everyone's bills will once again be controlled by the price cap, as we pay the lower of the two.

Prepayment rates will drop in July by a larger amount than direct debit, roughly 18% to a typical £2,077 a year, as for the first time the prepayment price cap will be at about the same level as the direct debit cap. Up to now, those on PAYG meters often ended up paying more a year for their energy bills than those paying by direct debit. However, in the Spring Budget, Chancellor Jeremy Hunt said that from July 1, the prepayment meter price will be the same as those who pay via direct debit. If you pay on receipt of a bill, prices are set to fall by about 18%, to £2,211 a year for a typical home.

However, the price cap sets a cap on the tariff, not your bill. So if you use more than the average household, you will pay more.

There are around four million households on prepayment meters in the UK, according to Ofgem. Some homes have always had them. Other households, however, will have had them fitted by suppliers after going into debt on their energy bills. Landlord often have prepayment meters fitted for their tenants.

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Martin has also advised all customers who were not on standard non-smart credit meters to take a meter reading on June 30. "This will draw a line in the sand to show how much energy you actually used on the current higher rate, and how much you used on the new cheaper rates. It stops your supplier from estimating usage and potentially assuming that you’ve used more at the higher rate than you actually have," he said.

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