British Gas, EDF, E.ON, SSE and Scottish Power currently give customers money off their bill if they pay promptly each quarter.
However, industry regulator Ofgem has now announced that due to new rules, energy companies will not be allowed to offer such discounts. This could see cash-strapped households £40 a year worse off.
Discounts currently running
Currently, SSE customers enjoy a £5 discount per fuel each quarter if their bill is paid within ten days.
However, from 15 November this discount is to be scrapped. This happens to be on the same day that scheduled bill hikes come into force, and 7.3 million customers will see their average energy bill go up by 8.2%.
Meanwhile, Scottish Power dual-fuel customers currently have access to a £31.50 discount each year when they pay what they owe within 14 days. On 6 December, its customers will be subject to an 8.6% price rise, and this discount will also be abolished.
British Gas customers, who pay within 14 days of receiving their bill are rewarded with a 5% saving. This equates to a maximum of £7.50 off their bill each quarter, which translates to a total of £30 a year.
E.ON offers a 3% discount for model customers. This means that households with the energy giant can enjoy £40.59 off the average annual £1,353 gas and electricity bill.
In addition, EDF dual-fuel customers get £5.68 off their next quarterly bill if they pay within ten days. This accounts for a saving of £22.72 per year.
New Ofgem rules
In letters to customers explaining that these discounts will be scrapped, the energy companies lay the blame with Ofgem.
This is because they will only be allowed to offer two discounts in the future – one for choosing a dual-fuel tariff and another for managing an account online.
An Ofgem spokesperson commented: “Our investigation showed that customers were confused by the number and complexity of tariffs and the discounts that could be applied to them.
“But it’s not about getting rid of discounts. Suppliers should look to offer the discount in a different way — like by offering the cheapest deal they can.”
However, experts have warned that energy suppliers are using the new rules as an excuse to drive up profit.
Tom Lyon, energy expert at uSwitch, said: “There was always a danger that consumers could end up losing discounts or other benefits simply because they don’t fit in with Ofgem’s blueprint.
“Ofgem needs to be monitoring this and ensuring that the changes it is making don’t end up reducing the opportunity for consumers to save money on their energy bills.”
Paying each quarter is believed to be the most expensive way to meet energy bills. When consumers pay by direct debit each month, they estimate how much gas and electricity will be used over the year and divide this into 12 payments.
If they end up paying for more than they have used during the year, they receive a refund, but if they have underpaid they need to make up the difference.