Currently such energy users - already the most vulnerable to debt - face a charge of up to £900, said Ofgem.
As many as 4.5 million people use prepayment meters for electricity, while 3.5 million use them for gas.
Consumers who pay in advance also face higher energy bills, although from April 2017 these prices will be capped.
The proposal was welcomed by the charity Citizens Advice.
At the moment, energy suppliers must try to come to an agreement with consumers who fall into debt.
If that cannot be achieved, they can apply to a magistrates court for a warrant to install a prepayment meter.
If given permission to do so, they are allowed to charge for the cost of putting it in.
Such charges are typically £400, but can be as high as £900 when court costs are included.
However, some suppliers do not charge anything.
Ofgem is suggesting that the maximum fee should be between £100 and £150.
For particularly vulnerable consumers, such as those in financial hardship or those with health issues, it says there should be no charge at all.
"It's deeply unfair that struggling customers get hit with high warrant costs when they're already grappling with debt, doubly penalising them," said Rachel Fletcher, Ofgem's senior partner for consumers and competition.
"Where they are needed, our proposals will protect customers by limiting prepayment meter warrant charges for all customers and removing them for the most vulnerable."
Gillian Guy, the chief executive of Citizens Advice, welcomed the idea.
"Capping the warrant charges and ending them altogether for vulnerable customers will help to stop people being pushed further into debt when they are already struggling to manage their costs," she said.
The Competition and Markets Authority (CMA) has ordered a price cap on energy charges for prepayment customers from April 2017. The precise level of the cap has not yet been set, but such households are set to save £75 a year as a result.
The Ofgem consultation will last until 9 November 2016.

Town, who beat Reading in the Championship play-off final in May, have been tipped by many to make an immediate return to the second tier.
The Terriers start the season with a trip to Crystal Palace on Saturday.
"People didn't expect anything from us last season and look what we achieved," the defender told BBC Radio Leeds.
"We are more than happy for people to write us off and more than happy to be the underdogs, that's absolutely fine. But as long as we go about our business in the right way, which I'm sure we will, then I see no reason why we can't give it a good go.
"We've got a good squad and good togetherness, and all of the attributes that we had last season I think will continue into this season.
"We know it will be tougher but we see no reason why we can't stake a claim to definitely stay in the league and progress higher up it."
The last Championship play-off final winners to avoid being relegated were Crystal Palace in 2013-14.
Queens Park Rangers, Norwich City and Hull City have all gone straight back down after winning promotion at Wembley in the last three seasons.
Smith, 25, missed much of Town's pre-season preparations with a foot injury sustained in the win over the Royals but is hopeful he will be able to feature against Palace.
"I feel good. It took a while but the doctors and physios said it would take time but I was desperate to get fit as soon as possible," he added.
"It looks like I'll be available for selection so I'm absolutely delighted with that and hopefully I can lead the team out at Selhurst Park."
Consumers who are forced to have prepayment energy meters put in should face a maximum installation fee of £150, the regulator has proposed.
[NEXT_CONCEPT]
Premier League newcomers Huddersfield Town are "more than happy with being written off", according to captain Tommy Smith.