‘Significant fall’ in price gap between energy payment types

The difference in prices between payment methods for energy has “fallen significantly” since new rules were introduced in 2009, according to Ofgem. The rules allow suppliers to charge different prices […]

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By Priyanka Shrestha

The difference in prices between payment methods for energy has “fallen significantly” since new rules were introduced in 2009, according to Ofgem.

The rules allow suppliers to charge different prices for different methods but only if the amount reflects the costs of providing those accounts.

They were designed to protect consumers and take into account that some payment types are more expensive to administer than others. For example, it costs suppliers more to provide prepayment meter accounts than direct debit accounts.

Ofgem claims its new analysis shows customers who pay using prepayment meters are now charged around £80 a year more on average compared to direct debit customers for dual fuel – a fall from a difference of almost £140 in 2009.

The price difference for quarterly payment compared to direct debit has remained at around £80 since the rules were introduced.

Since April, energy suppliers are required to tell consumers regularly what their cheapest tariffs are so they can save money by changing their payment method.

Rachel Fletcher, Senior Partner for Markets said: “Now that our reforms are in place giving consumers clearer information on bills and other communications, suppliers should be working to explain where consumers could make savings by switching payment method, where possible.”

Big Six supplier ScottishPower today agreed to pay a penalty of £750,000 for failing to justify the different prices it set for different payment methods between September 2009 and December 2012.