Energy Price Cap predicted to rise £66 due to wholesale energy price recovery

Rising Energy Bills

Struggling Consumers

Last year Ofgem reduced the default tariff price cap by £84 in response to the tumbling wholesale prices in an attempt to support consumers already struggling financially.

As 2021 began wholesale prices became volatile due to the uncertainty generated by new Covid-19 measures and bad weather.

A period of lousy wind conditions saw the National Grid issue several warnings overcapacity and sent day ahead prices soaring to record highs of £1,500/MWh and balancing supply challenges saw imbalance prices surge to £4,000/MWh

Rising costs of green policy

Another factor contributing to the rise in the energy price cap is the increase in policy costs associated with renewable energy and the governments drive to a NetZero economy.

Ofgem meanwhile is currently consulting as to whether an additional charge for Covid-19 related bad debt should be introduced with it estimating that a £21 charge be added for Summer 2021.

The final decision on the energy price cap will be made in early February, ahead of the summer price cap period in April.

Good news for energy suppliers?

Energy suppliers have taken a hit from rising bad debt among their customers, and a rise to the price cap and the introduction of the additional charge could help them manage it.

Unemployment is set to rise over the coming months as the economy struggles to recover from the lockdowns. As such, the issue of bad debt is set to increase further in the months ahead.

Energy suppliers that offer cheaper tariffs and better value can offer savings to their customers and as such offset, any ill will the increased price cap may generate. Green energy tariffs can also be appealing for consumers, especially ones that lower costs depending on time of use or like Octopus Energy's new tariff the amount the wind blows.

"The COVID-19 pandemic has brought a unique set of circumstances for suppliers having a difficult situation to juggle, facing higher wholesale costs and bad debt levels rising. Now, they will be assessing their commercial strategies closely. The decision of what to do is not a simple one, with fragile balance sheets, varying hedging strategies, and rising policy and network costs mean there is no one-size-fits-all answer," added Buckley.

Use Dyball's CRM to implement the price cap change

Whenever the price cap is changed it can cause energy billing issues for energy suppliers. In January 2020, OVO energy was fined £8.9 million by the regulator for overcharging customers because it failed to implement the energy price cap changes.

You can avoid such issues with Dyball's CRM as it incorporates an energy billing system allowing scheduled and ad-hoc bill production to your bespoke branded billing template. You can manage customer energy billing by exception, with bill runs automated through the system, and errors and exceptions quarantined to be resolved by your billing team.

The energy billing software we provide effortlessly integrates with our chosen ledger and direct debit partners. Additionally, our energy billing solutions can include bespoke integrations with your chosen Direct Debit and Sales Ledger provider.

CRM energy billing solutions will help automate your billing and collection processes.

Further Reading

Covid-19 pandemic sees smart meter installations fall to lowest level since 2016

World's first local time-of-use wind tariff launched- a sign of things to come?

No plans to lower VAT on energy bills despite Brexit promises says Treasury

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