Competition watchdog launches review into prepayment meter cap

It will use information on the progress of the smart meter rollout to determine whether the prepayment price cap would need to be revoked early or extended

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The Competition and Markets Authority (CMA) has launched a review to assess whether the prepayment charge cap should continue.

The review concerns the Energy Market Investigation (Prepayment Charges Restriction) Order 2016, which imposes a restriction on the unit rate and standing charge for those tariffs made available to prepayment customers by energy suppliers until the end of 2020.

The cap was intended to reduce customers’ bills by around £300 million a year.

The CMA will assess the scale of the smart meter rollout, the number of smart meters expected to be installed by the end of 2020 as well as the charge restriction for customers on default tariffs introduced by Ofgem.

The regulator also introduced the energy price cap earlier this month following government concerns about rising bills.

Information on the progress in rolling out smart meters is expected to allow the CMA to determine whether the prepayment price cap would need to be revoked early or whether to encourage Ofgem to review and take further measures to protect prepayment customers for a longer period of time.

Consumer bodies previously warned the government’s goal of installing smart meters across all homes and businesses in the UK will not be met – and called for the target to be extended.

The review will take into consideration the “risk of unintended consequences on competition, consumers and the smart meter rollout arising from the co-existence in the retail energy markets of two charge restrictions with different methodologies”.

The competition watchdog is, therefore, seeking comments – until 22nd February 2019 – on whether a change of circumstances has occurred and if so, whether the Order should be varied or revoked.

It states: “The CMA considers that the review represents a strategic priority as energy markets remain an important area for consumers and hence the CMA. More specifically, the CMA notes that prepayment meters are often used by vulnerable consumers and it is appropriate for the CMA to continue to focus on this area and ensure these customers continue to be protected in an effective and proportionate way and without creating unintended consequences for consumers or competition.

“In relation to risk, the CMA has obtained the views of interested parties and having taken into account the comments received decided to broaden the scope of its review to address these comments.”

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