Prepayment Levelisation is now live – Your guide to the scheme

We are delighted to announce that the Prepayment Levelisation scheme was successfully launched on April 1st, 2024. We are proud to have delivered this service within the allocated timeframe and budget, which will have a significant positive impact on some of the most vulnerable consumers in our society, helping to combat fuel poverty. This initiative is a prime example of how we are fulfilling our mission statement to “facilitate the efficient and effective running of the retail energy market, including its systems and processes, through promoting innovation, competition, and delivering positive consumer outcomes.”

Overview

In February 2024, Ofgem confirmed that measures would be introduced to ensure that prepayment (PPM) and direct debit customers under the price cap would pay the same standing charge, known as ‘levelisation.’

We were confirmed as the reconciliation operator in February 2024. We successfully implemented a non-volumetric payment scheme within a demanding timeframe and budget, thanks to the invaluable collaboration with our industry stakeholders and delivery partner Capgemini. Our work, which began in October 2023, has been extensive. Together, we agreed on the scheme design requirements, developed functional and non-functional system requirements, established governance arrangements from scratch, navigated the use of our contingency budget, and implemented a stakeholder engagement program. Through this collective effort and adopting agile methodologies, we have effectively delivered the necessary governance, systems, and processes to facilitate the scheme’s rollout.

Melissa Giordano, Deputy Director for Retail Systems and Processes at Ofgem, states,

“RECCo has proven to be an effective and efficient selection as the delivery partner and reconciliation operator for non-volumetric prepayment levelisation. I am pleased that RECCo has developed and launched levelisation and reconciliation processes in tandem, at a fast pace, and in a cost-efficient manner. The introduction of the non-volumetric prepayment levelisation scheme will ensure the stability of current and future suppliers, market diversity, and competition while supporting prepayment customers. This group, who have historically been paying a premium for their energy, has been at the greatest risk of self-disconnection and includes the highest proportion of disabled, chronically ill, and low-income customers among any payment method.”

Understanding Prepayment Meter Levelisation

Historically,  prepayment meter consumers have faced higher energy costs compared to those who pay by direct debit. In March 2023, the Chancellor announced that the Energy Price Guarantee (EPG) would be introduced to help rectify this issue. Initially, the costs were aligned by offering PPM customers a unit rate discount. As of the 1st of April 2024, this policy has been replaced by the non-volumetric payment levelisation scheme.

This programme levelises tariffs by requiring energy suppliers to charge direct debit customers more whilst discounting prepayment meter tariffs. However, a reconciliation method must be in place as the payment method split is different for each Supplier’s portfolio. This is so Suppliers with higher-than-average PPM consumers can be credited, whilst those with fewer-than-average can be debited.

What is RECCo’s role?

In October 2023, Ofgem appointed us as reconciliation operators. We have overseen developing and implementing industry processes under the Retail Energy Code (REC). Our functional system, which went live on 1st  April 2024, facilitates supplier payments to enable non-volumetric levelisation, ensuring fair treatment across customer segments.

We would like to thank the industry for its proactive engagement, support, and valuable input in this programme, as well as our service delivery partners, Capgemini and Gemserv, for delivering the system and the governance changes to the REC, respectively.

What Suppliers need to know

All domestic Suppliers are required to take a snapshot of their data at midday on the 1st day of each Calendar Month and send it to the REC Code Manager by the 15th Calendar Day of the month. We will calculate positions and send an invoice 15 Working Days (WD) after the data submission date. Suppliers are expected to pay invoices within 10 WDs of receipt of acceptance. All funds are distributed equitably, and payments to Suppliers will be sent within 10WDs of the payment deadline.

For submission templates, the Invoice Schedule, and additional information, please visit the Payment Levelisation Page on the REC Portal.

Further information

Since October 2023, we have hosted several webinars that detail how the prepayment meter levelisation scheme works and our role. Use the links below to access these recordings.

You can also read earlier articles using the links below:

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