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Ofgem advised to extend energy price cap for prepayment customers beyond 2020

Ofgem, the energy regulator for England, Wales and Scotland, has been advised to extend beyond 2020 the cap on energy prices for people who pay for their energy upfront. The cap will also be raised.

The Competition and Markets Authority introduced the cap on gas and electricity prices in 2016 to protect customers on prepayment meters as they are not able to switch suppliers as easily as other customers.

The cap was due to be lifted at the end of 2020, as the CMA expected that by then the rollout of smart meters, replacing prepayment meters, would be complete and increased competition would lead to lower prices.

But following a review, the CMA said: “It now recommends that Ofgem should continue to protect prepayment customers once the CMA’s cap expires, given that the full rollout of smart meters will not have completed by 2020.”

The regulator did not say how long the extension should be.

The cap will also be reset based on more up-to-date and detailed data than what was available to the CMA in 2016. As a result, the cap will be increased from 1 October, with prepayment customers paying roughly £1 a week more based on current prices.

“A price cap set too low may lead to suppliers leaving the market, reducing both competition and consumer choice. Even with the revised level of the price cap, prepayment customers will still be protected from unnecessarily high prices,” the CMA said.

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