Future of Prepayment: Discussion Paper

Future of Prepayment: Discussion Paper 645 KB

Prepayment in energy has seen major changes over the past few years. There was a turning point in 2023, when clear failures by some energy suppliers and evidence of severe harm led to significant shifts in energy regulation. There are now significantly better protections for prepayment meter users, and changes mean they no longer pay a premium on the price cap. Our research also shows, historically, they have been more likely to be satisfied with their supplier relative to users of other payment methods. However, satisfaction levels have dropped between July/August 2025 and January 2026 and there are also other ongoing challenges. 

The number of people asking us for help with self-disconnections - where households lose their energy supply as a result of not topping up their meter - remain higher than before the energy crisis. There is some ambiguity in current regulation which creates risks for vulnerable customers who choose to prepay, but then struggle to stay on supply. Self-disconnection can significantly harm physical and mental wellbeing for people in vulnerable situations. 

At the same time, energy debt has risen significantly since the last crisis. The total average arrears for gas and electricity, where there is no arrangement to repay, is now £3,285 - an all time high, and an 86% increase from 3 years ago . The cost of this debt flows through to all consumer bills. Prepayment remains an important option for helping people repay debt - but only where it is safe for them to do so. At a time of rising cost pressures, tackling the rising debt burden and protecting the most vulnerable from self-disconnection are a twin challenge. 

The current prepay rules are complex. They provide vital protection for those consumers who need support, but suppliers have expressed concerns that a small minority of consumers who can afford to pay are misusing the prepayment rules. 

Changes to Ofgem’s regulation, increased data sharing and the rollout of smart meters offer opportunities to improve consumer outcomes. However, looking to the future, there are a number of questions which must be answered as the energy market becomes more complex.

We explore the challenges of supporting prepayment customers, persistent self-disconnection, and whether existing safeguards provide clear guardrails for firms throughout this paper. We also want to ensure that prepayment remains fit for the future so that energy consumers who prepay can benefit from the energy transition. As more engaged and more affluent customers move into more complex and innovative products, the framework for consumers who prepay is lagging behind.