The Office for National Statistics (ONS) has concluded its classification review of the Energy Price Guarantee Pre-Payment Meter Discount scheme (EPG PPM) for domestic customers with a pre-payment meter in Great Britain, in the context of international statistical guidance. This followed the announcement by the UK government in the Spring Budget 2023 and as published in ourForward Work Plan on 28 April 2023.
The EPG PPM Discount provides support through the EPG mechanism, and incorporates the differences between PPM and direct debit payment costs in both unit rates and standing charges. The EPG PPM will be classified as subsidies on products, paid by central government to the energy suppliers in the non-financial corporations sector in the UK.
The implication for consumer price inflation of the classification decision is that the EPG PPM, as a subsidy on products paid by central government to energy suppliers, influences the prices that domestic consumers are charged for a unit of gas. It is these reduced gas unit prices that will be used in compiling the Consumer Prices Index including owner occupiers' housing costs (CPIH), the Consumer Prices Index (CPI) and the Retail Prices Index (RPI), which will hence be lower while the scheme is in operation than if the EPG PPM had not been introduced. It is applied to gas unit rates only, as the combined unit rate and standing charge for electricity pre-payment meter customers will already be less than the equivalent for direct debit.
Under the EPG PPM, the UK government specifies a price reduction to be applied per unit of gas consumed. The UK government fully compensates energy suppliers for the savings delivered to domestic customers. The EPG PPM Discount takes effect from 1 July 2023 until 31 March 2024, with the discount being reviewed by the UK government every three months during this period.
The EPG PPM Discount will not be applied in Northern Ireland as the energy market there is different, and the cost differences between direct debit and pre-payment meter customers do not exist in the same way that they do in Great Britain.
Decisions on whether to include rebates, subsidies and discounts in our inflation statistics are taken on a case-by-case basis, aiming to be consistent with the UK National Accounts, the public sector finances, and other economic statistics. They are based on international statistical guidance and practical considerations.
If you require any further information on this classification assessment, please email econstats.classifications@ons.gov.uk. If you require more information on the classification review's implications for inflation statistics, please email cpi@ons.gov.uk for CPI queries.
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