Ofgem confirms a record high increase to the Energy Price Cap as 26 Energy Suppliers sign up to fresh commitments to help struggling consumers
The energy regulator Ofgem has confirmed that the energy price cap will rise by a record amount in October with the default tariff cap to rise £139 from £1,138 to £1277 and prepayment customers will see an increase of £153 from £1,156 to £1309.
Why the Energy Price Cap rise?
Energy suppliers have been hit hard by rising wholesale energy prices and the impacts of the Covid-19 pandemic. Gas prices hit a record high and electricity costs are on the rise too due to a surge in fossil fuel prices forcing up inflation.
Energy suppliers will now be able to charge their customers who are on default tariffs and on prepayment tariffs more a move that many consumer groups have raised concerns about.
For suppliers, however, the rise will be a welcome one as many have been struggling financially.
What are the Impacts of a Price Cap increase?
While the price cap rise for default tariffs isn’t as high as the £150 initially forecast by industry experts the rise will still heighten concerns that more customers will default on their bills.
An estimated 15 million households will be impacted by the price cap rise.
“Higher energy bills are never welcome, and the timing and size of this increase will be particularly difficult for many families still struggling with the impact of the pandemic. The price cap means suppliers only pass on legitimate costs of supplying energy and cannot charge more than the level of the price cap, although they can charge less.
“I appreciate this is extremely difficult news for many people. My commitment to customers is that Ofgem will continue to do everything we can to ensure they are protected this winter, especially those in vulnerable circumstances. We have strict rules in place to ensure that energy companies treat customers fairly and will take necessary enforcement action to ensure they are adhered to. We are also working collaboratively with the industry on a package of further help for those in difficulty this winter.” said Ofgem’s chief executive Jonathan Brearley.
26 Energy Suppliers sign up to new commitments to help their customers
To provide extra support to their customers 26 energy suppliers, covering 90% of the UK’s domestic market signed up to new commitments drawn up by Ofgem.
These new commitments include pledges to increase awareness of the help customers can get with paying their energy bills as well as promises to make it easier for customers who find themselves in financial difficulty to get the help they require.
The energy suppliers signed up to the new commitments have also promised to help ensure that energy bill accuracy is improved and to step up the number of smart meters being installed for prepayment customers.
A new public awareness campaign is to be launched this winter to ensure that energy consumers know their rights and know where they can seek support if they struggle to pay their energy bills.
According to Energy UK, energy suppliers have provided millions of pounds of financial aid to support their customers throughout the pandemic with Ofgem data showing that up to a million customers a month have been put onto repayment plans or payment plans. The emergency credit scheme was utilised 1.5 million times by prepayment customers last November and December.
Also read: How should Energy Suppliers explain Energy Bill Increases?
Energy Suppliers are doing their part
Energy suppliers already spend £1 billion a year on supporting their customers on low incomes and pay into schemes such as the Warm Home Discount and the Energy Companies Obligation.
However, due to the triple whammy of Covid, record high Wholesale prices and the deadline for several obligations coming up concerns are mounting that several smaller energy suppliers may be forced to exit the market in October.
“It’s going to be a difficult winter for some of our customers who will be concerned about paying bills or keeping their meters topped up as they use more energy over the winter months.
“We know customers aren’t always aware of what support is available or can be hesitant to seek help. So as well as showing their continued commitment to doing all they can to support those in need, suppliers are trying to get the message across that help is available - and to make it as easy as possible to access it. We will continue this work with suppliers over the autumn to try and make sure this message hits home over the autumn and winter,” said Energy UK’s chief executive, Emma Pinchbeck.
Also read: Worries grow over possible wave of small energy supplier failures in October
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Further Reading
Dyball’s Energy Industry Software – What do we offer?
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For more information on how to start and manage an energy company, get in touch with Dyball Associates today.
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