Jeremy Hunt will end the “prepayment premium” from July, saving more than four million households £45 a year on their energy bills, according to the Treasury.
Here is everything you need to know about the changes, and the other energy bill announcements to expect in the Budget.
How will bills change for prepayment customers?
Households on the pay-as-you-go meters, who are typically low income, currently pay more on average than direct debit customers because of firms managing the meters passing on costs to users.
Mr Hunt said: “It is clearly unfair that those on prepayment meters pay more than others. We are going to put an end to that.
“From July four million households won’t pay more than those on direct debits. We’ve already cut energy bills by almost half this winter, and this latest reform is proof again that we’re always on the side of families.”
The Treasury estimates the change will cost the taxpayer £200 million.
A four-month investigation by i found that courts were processing hundreds of warrants in just minutes allowing debt agents on behalf of suppliers to forcibly fit the meters, amid concerns from MPs and charities that insufficient checks were being made on whether customers were vulnerable.
Firms were subsequently banned from installing prepayment energy meters under warrant.
The ban, which had been due to end this month, is now set to be extended “indefinitely” while the industry regulator pushes suppliers to sign up to a new code of practice.
Ofgem’s chief executive, Jonathan Brearley, told an evidence hearing on the controversial meters by the Justice Committee and the Business, Energy and Industry Strategy Committee, that companies would not be restarting forced installations after 31 March.
Is the energy price guarantee being extended?
The Chancellor will announce a three-month extension to the energy price guarantee in today’s Budget.
The guarantee, which currently caps bills for the average household at £2,500 a year, will now remain at that level until June. It was due to expire on 1 April.
The increase would have doubled the number of people unable to afford their energy bills from one in 10 to one in five. However, households will still see their bills increase, as the £400 grant that has been paid in monthly instalments since October has now come to an end.
The Prime Minister, Rishi Sunak, said: “We know people are worried about their bills rising in April, so to give people some peace of mind, we’re keeping the energy price guarantee at its current level until the summer, when gas prices are expected to fall.
“Continuing to hold down energy bills is part of our plan to help hardworking families with the cost of living and halve inflation this year.”
Mr Hunt said: “High energy bills are one of the biggest worries for families, which is why we’re maintaining the energy price guarantee at its current level.
“With energy bills set to fall from July onwards, this temporary change will bridge the gap and ease the pressure on families, while also helping to lower inflation too.”