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Citizens Advice response to the Ofgem call for evidence around the levelisation of payment method cost differentials

30 June 2023

Citizens Advice response to the Ofgem call for evidence around the levelisation of payment method cost differentials [ 240 kb]

We welcome this call for evidence and believe Ofgem is right to consider levelising costs across different payment types. Customers in vulnerable circumstances account for a higher proportion of consumers on prepayment (PPM) and Standard Credit (SC) terms compared to Direct Debit (DD). As payment method cost differentials under the retail price cap have broadly increased in line with the level of cap this means customers in vulnerable circumstances have been disproportionately impacted overall by these increases. So, we support some levelisation of payment method cost differentials. We believe that the levelisation should:

  • Apply to SC as well as PPM. The payment method cost differential between SC and DD has increased markedly - from £84 in April 2021 to £203 in April 2023.

  • Maintain some degree of cost-reflectivity to ensure consumers still have an effective incentive to choose more efficient payment methods. Without this, overall industry costs will rise, increasing bills for all consumers.

  • Avoid distorting competition, particularly with regards to the ability of suppliers to offer competitive prices outside of the retail price cap.