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Millions of homes with prepaid energy meters will see their bills drop. The controversial additional costs on pay-as-you-go meters will be phased out from July 2023. The move will mean more than four million households across the UK will save around £45 a year on their energy costs.

Chancellor Jeremy Hunt has confirmed that the “prepaid premium” will come to an end. It’s news that will be welcomed by those who use the meters, typically low-income or vulnerable households, who, on average, currently pay more than direct debit customers because the companies that manage the meters pass the costs along.

The change is expected to take effect from July 1, when the Chancellor announces the plans in his Spring Budget as part of the reforms to the Government’s Energy Price Guarantee. The forced installation of prepaid meters will also end on Friday March 31, after Ofgem called on all providers to halt installations in a bid to protect vulnerable customers.

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Government Energy Price Guarantee. which currently puts the average household energy bill at £2,500 a year, was due to rise by £500 next month to £3,000. However, it is believed that the expected price hike could also be ruled out. It comes amid pressure from energy poverty campaigners.

The Energy Bill Support Scheme (EBSS) will also end this month. This has given most UK households £400 off their energy bills, delivered as £66 or £67 monthly reductions on the bill since October.

Despite no official word from the Treasury, Chronicle Live reported that money expert Martin Lewis had written to Jeremy Hunt with the support of more than 110 charities to ask the government to drop the £500 increase. He said that he is “90% sure” that the price increase will not go ahead. However, he expressed concern that struggling households will still feel the pressure when the EBSS comes to an end.

The consumer ombudsman said: “The real big shock is the end of the £67 monthly payments, which of course helped commensurately reduce users a lot more.” The MoneySavingExpert website has a helpful calculator tool for households to calculate how much they are likely to pay starting in April after the changes.

Announcing that the ‘prepaid premium’ would be removed from July, Jeremy Hunt said: “It’s clearly unfair that those with prepaid meters pay more than others. We’re going to put an end to that. Starting in July four million households will not pay more than residents. We have already cut energy bills by almost half this winter, and this latest reform is further proof that we are always on the side of families.”

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