£45 energy bill cut for families with prepayment meters from July

More than four million households could benefit from the move announced in the Spring Budget

mother and son cuddling in front of a radiator looking at a mobile phone
(Image credit: Getty Images)

Families with prepayment energy meters are expected to see their annual energy bills slashed by £45 a year, according to the Government. The move was officially announced in Chancellor Jeremy Hunt's Spring Budget. 

The news comes as households across the country have been worried about how much their energy bills will cost after months of spiralling energy prices. While families are protected from huge spikes in energy prices by the Energy Price Guarantee, the guarantee was slated to rise to £3,000 from April. But that will no longer happen, and the price guarantee will be extended at its current level until July. At that point, wholesale energy prices are expected to come down below the price guarantee.

If you and your family pay for your energy in advance of using it, make sure you try these prepayment energy meter tricks to try and keep your bills as low as possible.

Ending the prepayment penalty

Households and those on lower incomes are more likely to have prepayment energy meters, where they pay for their energy before they use it. But prepayment customers often pay more than those who have a standard energy meter and pay by direct debit, due to the additional costs to the energy supplier of managing the meters. This has long been thought to be unfair, given the fact that those on prepayment meters are likely to be the ones most vulnerable to rising prices.

While forcibly moving customers to prepayment meters was temporarily banned, there were a rising number of households remotely moved to prepayment meters. This led to the energy regulator Ofgem conducting a review into prepayment meters. It has already started telling energy suppliers to compensate those who were wrongly moved to a prepayment meter. 

The planned £45 reduction in energy bills for those on prepayment meters should bring prices in line with those on standard meters. It is expected to come into force from 1 July 2023. The government will make up the shortfall under the Energy Price Guarantee. Ofgem is expected to report on how it plans to permanently end the prepayment penalty once the price guarantee is no longer in effect. 

But there is good news if you are a British Gas prepayment customer. The energy supplier is cutting the prepayment penalty ahead of July. This means that around one million of their prepayment customers will benefit from an additional £15 saving.

Will energy prices still go up in April?

While the Energy Price Guarantee may not rise, the final instalment of the £400 energy rebate was paid in March. This means that from April, families will not receive an automatic reduction in their energy bills so they might feel more expensive. But with warmer weather on its way and lighter evenings, you may find that you use less energy and your bills are lower to help cushion the blow of losing the discount.

When the Energy Price Guarantee came into force, it was meant to be in place for two years at an average £2,500 a year (based on typical use). But as energy prices kept rising, Chancellor Jeremy Hunt said in the Autumn Budget 2022 that while the guarantee would remain in place, from April 2023, it would rise to £3,000. 

But as it's been predicted that wholesale energy prices will fall below the current £2,500 level of the price guarantee by from July 2023, there were increasing calls for the increase to be scrapped. Chancellor Jeremy Hunt confirmed in his Spring Budget that the increase has been postponed. It has not yet been announced what will happen to the Energy Price Guarantee from July. 

Sarah Handley
Consumer Writer & Money Editor, GoodtoKnow

Sarah is GoodtoKnow’s Consumer Writer & Money Editor and is passionate about helping mums save money wherever they can - whether that's spending wisely on toys and kidswear or keeping on top of the latest news around childcare costs, child benefit, the motherhood penalty. A writer, journalist and editor with more than 15 years' experience, Sarah is all about the latest toy trends and is always on the look out for toys for her nephew or Goddaughters so that she remains one of their favourite grown ups. When not writing about money or best buys, Sarah can be found hanging out with her rockstar dog Pepsi, getting opinionated about a movie or learning British Sign Language.