More than four million struggling households are set to save £45 a year on energy bills from July 1, the Government has said.
This is done by aligning the advance payment for energy costs to customers who pay by direct debit.
Households with prepayment meters tend to be vulnerable or have low incomes.
But they pay more because energy companies pass on the cost of managing the meters.
Chancellor Jeremy Hunt, who is expected to announce the plan in his spring budget on Wednesday, said it was “clearly unfair that those with prepayment meters are paying more than others”.
The extra costs that struggling households would have had to pay will instead be covered under the government-funded Energy Price Guarantee, at a cost of £200m.
Regulator Ofgem will report on how to permanently end the “prepayment penalty” when this government support ends in April 2024, the Treasury said.
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Prepaid meters have been in the limelight in recent months.
Last month it emerged that debtors working for British Gas had broken into the homes of vulnerable people to force-install meters and courts had waved through petitions from energy companies to forcibly install meters.
Ofgem, which verifies prepayment meters, asked energy companies in late February to compensate customers whose homes were wrongly fitted with a prepayment meter.
Firms have been banned from installing prepaid energy meters under warrants, but that is due to end at the end of March.
In November last year, it was announced that more and more households were having their smart meters switched to prepaid meters remotely.
Energy Security Secretary Grant Shapps said: “Charging prepaid meter customers to get their energy is a tax on some of our most vulnerable – this change will stop that.”
Labor said the Government had “finally listened to their calls for an end to the unfair penalty for prepayment counters”.
“Their delay will be cold comfort to the millions of prepay customers who are paying higher energy bills because of government indecisiveness,” said Ed Miliband, Labor’s shadow climate and net zero secretary.
In addition to the prepayment aid, the government is expected to extend the energy price guarantee at the current level for another three months.
Typical household energy bills would rise to £3,000 a year from April, the government is expected to keep its current level of support capped at £2,500.
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