(qlmbusinessnews.com via theguardian.com – – Thur, 7th Feb 2019) London, Uk – –
Ofgem’s decision on default tariffs and prepayment meters down to rising wholesale costs
Around 15m households will see their energy bills increase by more than £100 a year from April after the regulator Ofgem said it was lifting two price caps because of rising wholesale costs.
Big energy suppliers are expected to increase their prices by £117 for 11m customers on default tariffs to a new ceiling of £1,254 a year for a home with typical use, leaving many consumers paying more for their electricity and gas than before the flagship policy took effect on 1 January.
Consumer groups said the rise was “eye-watering” and would be a shock for people who thought the cap would stop their bills from rising.
The significant increase, which wipes out the average saving of £76 from the cap, will be embarrassing for ministers, who promised that people would save money under the flagship policy.
The rise is one of the worst increases in years and on a par with the largest by the big six energy suppliers over the past two years, many of which the government claimed were unjustified.
Comparison sites, which are opposed to the cap, branded the increase “brutal”, “jaw-dropping” and the “worst possible start for the energy cap”.
Ofgem also announced a rise of £106 a year to £1,242 for a further 4m households on prepayment meters, who are typically more vulnerable customers.
Together, the increases in the two caps will add a collective £1.71bn to consumer bills, according to the auto-switching site Look After My Bills.
Ofgem insisted consumers were paying a fair price for their energy despite the increases. The regulator said it had to raise the caps because wholesale costs facing energy firms had increased by 17% and other costs had climbed, too.
“We can assure these customers that they remain protected from being overcharged for their energy and that these increases are only due to actual rises in energy costs, rather than excess charges from supplier profiteering,” the regulator’s chief executive, Dermot Nolan, said.
The regulator said its analysis suggested without the cap people would be “paying significantly more even after the increase” of the cap in April.
The government said the higher caps reflected sharp increases in electricity and gas costs.
Claire Perry, the energy minister, said: “We were clear when we introduced the cap that prices can go up but also down.”
Gillian Guy, the chief executive of Citizens Advice, a consumer group that backs the cap, said: “As unwelcome as this news is, it’s likely that prices would be higher still without the cap and there are steps people can take to ease the strain on their bills.”
Industry body Energy UK said suppliers of all sizes were facing “drastically rising costs”.
One of the big six companies, npower, last week blamed 900 job cuts on the cap and competition.
The caps dictate the maximum suppliers can charge per unit of energy and for a standing charge, so higher energy users will pay more.
By Adam Vaughan