Direct debit bills can be 31% less than pre-payment meters

The government says pre-payment households are charged an average of �144 a year more than those who pay by direct debit.

It will also give nine million pensioners a one-off increase in the winter fuel payment this year.

But a further Budget measure may cause future energy prices to rise.

Winter help

The winter fuel payment to the over-60s will increase from �200 to �250 in 2008-9.

Those over 80 will receive an extra �100, taking their total to �400.

If the Government is serious about winning the battle on fuel and child poverty then this was a missed opportunity Jenny Saunders, National Energy Action

"I have decided to help pensioners who are facing pressures such as higher energy bills," Chancellor Alistair Darling said.

Age Concern, however, said a one-off boost was insufficient.

"Whilst increases to the winter fuel payment this year are good news in the short-term, we need to see a long-term solution for the estimated 2.25 million older people in fuel poverty," Gordon Lishman, Director General of Age Concern said.

Campaigners National Energy Action said the chancellor should have extended the fuel payment to other low income families and people with disabilities.

"If the Government is serious about winning the battle on fuel and child poverty then this was a missed opportunity," chief executive Jenny Saunders said.

Social tariffs

The government also wants energy suppliers to triple the amount they spend on social tariffs to �150m to reduce the bills of the poorest customers.

Consumer group Energywatch recently said social tariffs reached only one in 15 of the most vulnerable households.

The government should have learned by now is that relying on voluntary action by suppliers will not deliver the goods Energywatch

Mr Darling said the government would work with energy suppliers to find the best ways to help those struggling with higher bills, but would introduce legislation if necessary

Energywatch warned negotiations may not result in significant falls in fuel poverty.

"Companies like EDF Energy and British Gas have made significant efforts [with social tariffs]," it said.

"But one thing the government should have learned by now is that relying on voluntary action by suppliers will not deliver the goods," Energywatch said.

But British Gas owner Centrica said it was happy the government had not imposed its own solution to fuel poverty on the suppliers.

"We are pleased the chancellor has left the way open for further discussions with the industry on this issue," Centrica chief executive Sam Laidlaw said.

'Discriminating'

The government has given the energy companies until next winter to find a way of treating the five million customers on pre-payment meters more fairly.

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It believes households who pre-pay are twice as likely to be on low incomes as those who pay by direct debit.

Energywatch claims the companies are "discriminating" against this group of customers and have made �400m in extra revenue from them.

But regulator Ofgem says it costs suppliers about �85 a year more to supply pre-pay meters, compared with people on a standard direct debit.

Generating profits

However, the Chancellor talked about one further change in his Budget speech which could result in higher, not lower energy bills.

There had been speculation the government was considering a windfall tax on energy generators, in order to raise money to help those struggling to pay their gas and electricity bills.

Prime Minister Gordon Brown has spoken of the billions of pounds of "windfall profits" the companies made after receiving free pollution permits under the European Emissions Trading Scheme.

Instead of a windfall tax, the chancellor confirmed that the energy generators would have to buy all of their allowances in an auction from 2013 - a move that was announced by the European Commission in January.

It is hoped that if companies have to buy permits to emit carbon dioxide above their set limits, this will encourage them to be more energy-efficient.

But David Porter, chief executive of the Association of Electricity Producers, said having to buy permits might push up households' gas and electricity bills.

"It is pretty obvious," he told the BBC. "It pushes costs up. And these costs - some of them - will reach the customer."