Breakdown of the prepayment price cap (GBP £)

Chart

Javascript is required to render chart Breakdown of the prepayment price cap (GBP £).

Source: Ofgem analysis.

Information correct as of: October 2020

This chart shows a breakdown of the costs that make up the prepayment meter price cap level. It helps to explain the relationship between the prepayment price cap level we set, and the different cost factors that influence it each time we update it. We update this chart to reflect the prepayment price cap level that come into effect in April and October each year.

The prepayment price cap level limits how much a supplier can charge customers on prepayment meters per unit of energy. It doesn’t cap the total cost of a bill. That’s because the amount customers pay also depends on how much gas or electricity they’ve used. Suppliers can charge less than the set cap level, but not more. All prices shown here are for a dual fuel customer with typical energy use.

As of April 2020, all the costs shown in this chart are calculated using the latest Typical Domestic Consumption Values (TDCV) that entered into effect from 1st April 2020 (see more methodology section for more details).

In practical terms, this means that previous publications on the level and costs of the cap will not be exactly the same.

Click the ‘more information’ tab above for a summary of the latest trends, details of how to interpret the component costs and allowances, and for information on our methodology.

Note *: Following a change in methodology the values for 2019/20 winter onwards are not directly comparable to previous periods.

**: The change in methodology has made it possible to identify EBIT as a cost component distinct from the headroom allowance as in previous periods.

Policy Areas:

  • Electricity - retail markets
  • Gas - retail markets

Data Table

Breakdown of the prepayment price cap (GBP £)
Wholesale costsNetwork costsPolicy costsOther, indirect cost allowancePrepayment uplift allowanceEBIT**Headroom allowance VAT
2017 summer350248121163642749
2017/18 winter342249109165652648
2018 summer367249131168662850
2018/19 winter409249130169673053
2019 summer479262139171673358
2019/20 winter*43226414618368211256
2020 summer*39526516018768211255
2020/21 winter*30726516218668191151

More information

At-a-glance summary

  • We update the prepayment price cap level on 1 April and 1 October each year. 
  • In July 2019, the CMA revised the methodology to better reflect the costs incurred in delivering energy services to prepayment customers. From 1 October 2019, the prepayment meter price cap methodology aligns more closely with our methodology for the default tariff price cap.
  • In August 2020, Ofgem announced that the Default Tariff Cap would continue to protect default prepayment meter customers after the CMA Prepayment Meter Price Cap expires at the end of 2020. 
  • The tariff level will reflect changes in the costs of supplying energy. We determine how much each independent component of the cap should change by looking at external cost data. Details of the latest update can be found here - Prepayment meter cap level: 1st October 2020 to 31st March 2021.

Relevance and further information

This chart summarises the different costs that make up the prepayment meter price cap level. 

The Competition and Markets Authority introduced the price protection of a price cap to prepayment meter customers, who can’t easily access the cheapest tariffs, in April 2017. These customers are often in vulnerable circumstances. They designed the tariff based on a broad estimate of how much it costs an efficient supplier to provide gas and/or electricity to certain groups of customers. This is due to expire on 31 December 2020.

In August 2020, Ofgem announced that the Default Tariff Cap would continue to protect default prepayment meter customers after the CMA Prepayment Meter Price Cap expires at the end of 2020.

The Default Tariff Cap for the period 1 October 2020 to 31 March 2021 includes a new prepayment cap level, which will protect PPM customers with default tariffs once the CMA Prepayment Meter Price Cap expires on 31 December 2020.

As the energy regulator, Ofgem administers and calculates the level for the cap.

We update the level of the tariff every six months, either reflecting changes in underlying costs, or increases in inflation.

Methodology

  • The level of the cap is based on calculations of wholesale costs, network costs, policy costs, operating costs and costs specifically associated with prepayment meters. It also includes a degree of ‘headroom’, which is designed to allow suppliers to offer competitive deals underneath the level we set for the prepayment price cap.
  • We calculate the bill values associated with the different tariff types using a ‘typical domestic consumer’ with ‘medium’ energy use. Since April 2020, typical consumption values for a medium consumer are 12,000kWh/year for gas and 2,900kWh/year for electricity (profile class 1). Find out more at Typical domestic consumption values.
  • All prices shown are for a dual fuel customer (i.e. where a customer takes gas and electricity from the same supplier). 
  • In July 2019, the CMA revised the methodology used to calculate the cap to better reflect the costs incurred in delivering energy services to prepayment customers. From 1 October 2019, the prepayment meter price cap methodology aligns more closely with Ofgem’s methodology for the default tariff price cap.
  • Further details of the methodology for calculating the level of the prepayment price cap can be found in the CMA Order and Explanatory Note and the update published in July 2019.
  • For a detailed breakdown of the cap by meter type and region, please see our page for the latest level for 1st October 2020 to 31st March 2021.
Date correct
October 2020
Policy areas