Ofgem has analysed differences in price between different payment methods used by consumers following an information request to suppliers in February 2014. It has found that the gap between prepayment and direct debit has narrowed since 2009. Read more here.
Ofgem rules allow suppliers to charge different prices for different payment methods, but only if the amount reflects the cost of providing those accounts. Some larger suppliers do spread some of the costs of prepayment customers among the whole of their customer base. This is consistent with regulations and guidance, which allow for differences. These result in reduced price differences for vulnerable customers, who often do not have the option of alternative payment methods. Suppliers can also charge the same price regardless of payment method, so they can spread the costs they incur across all customers. However, the majority of consumers pay by direct debit (including half of all fuel-poor households) so any change would mean these consumers would pay more.
Customers who use prepayment meters are now charged around £80 a year more on average compared with direct debit customers for dual fuel. This is a significant fall as the difference was almost £140 in 2009. Ofgem is satisfied that across the market the price on different payment methods reflects the varying costs suppliers face in providing them. The price difference for quarterly payment compared to direct debit has remained at around £80 since 2009.