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Price cap levelisation, progress made but more work needed

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29 February 2024

Victory for vulnerable households who’ve paid an unfair premium for decades

Last May, CSE responded to the Government’s consultation on equalising the cost between pre payment meter (PPM) and other payment methods.

The levelisation allowance is a new cost that will be added into the price cap from 1 April 2024. This means PPM customers will now pay the same standing charge as those who pay by Direct Debit.

Support for PPM progress

We strongly support the Government’s commitment to making energy costs equal for PPM and Direct Debit customers. As the Competition and Markets Authority’s 2016 energy market investigation showed, PPM customers are more likely to:

We welcome the changes shown in the table below. This is a major victory for vulnerable households who have paid an unfair premium for decades. However, we note people on Standard Credit are now nearly £100 worse off than Direct Debit customers.

Summary of changes to the energy price cap by payment method and meter type

Cap levelJanuary 2024 to March 2024April 2024 to June 2024Change
Direct Debit£1,928£1,690-£238
Standard Credit£2,058£1,796-£261
Economy 7 (Direct Debit)£1,272£1,125-£147
All bill values are calculated using the current Typical Domestic Consumption Values (TDCVs), 2,700kWh for electricity, 11,500 kWh for gas and 3,900 kWh for multi-register meters, such as Economy 7 customers. All values are rounded to the nearest £.

Concerns about Standard Credit

While better than scenarios in the levelisation consultation that saw customers on Standard Credit facing fuel bills that are £200 higher than those on direct debit, the regulator must implement further reforms to close the gap.

Like PPM customers, those on Standard Credit often show greater vulnerability – they tend to be older, have lower incomes and less financial literacy. Both groups have higher rates of fuel poverty according to the LILEE indicator (based on 2022 data).

Energy bills must be fair and affordable for all payment types and CSE has long called for fairness for those on PPMs and Standard Credit. We urge the Ofgem to build on the progress made for PPMs by swiftly closing the remaining gap for Standard Credit customers. While we applaud steps taken on PPMs, the job is not done. Better fairness demands urgent action to equalise energy costs across all payment methods.

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