Energy regulator Ofgem has announced a revised plan to increase the energy price cap by £6 in April 2023, a reduction from the initial proposal of £17. The watchdog aims to address a £3 billion debt pile in the energy sector, attributing it to the impact of the energy-driven cost of living crisis on household budgets. Ofgem emphasizes the importance of ensuring suppliers have sufficient funding to comply with regulations regarding customers facing payment difficulties.
Protecting Consumers and Suppliers’ Financial Stability
Ofgem is keen to prevent a recurrence of the severe financial pressure on energy suppliers experienced in 2021, leading to the collapse of several companies, including Bulb. The crisis resulted in an £82 increase in every customer’s bill. The price cap, adjusted since the previous winter, not only reflects market prices but also includes mechanisms to allow firms to recover limited costs. The regulator aims to strike a balance between protecting consumers and ensuring the financial stability of suppliers.
Elevated Energy Supplier Profits
Energy suppliers have reported elevated profits in 2023, attributed to Ofgem allowing firms to recover from deep losses incurred during the purchase of additional wholesale energy to cover customers from collapsed suppliers. Major suppliers like British Gas, EDF, Scottish Power, E.On, and SSE have reported substantial profits for the first half of the year.
Consumer Advocacy and Opposition
Consumer advocacy groups, including the End Fuel Poverty Coalition, argue that it is unfair for the majority to bear the burden of a failed energy system. They call for government intervention, proposing a help-to-repay scheme for homes in energy debt. Critics emphasize that energy suppliers have already posted significant profits, and consumers should not pay the price of the record energy debt.
Ofgem’s Response and Regulatory Measures
Tim Jarvis, Ofgem’s director for markets, acknowledges the impact of cost of living pressure on consumers and the record levels of energy debt. Ofgem highlights steps taken to ensure better care of customers, including the offer of support through affordable payment plans. The regulator emphasizes the need to address the record-level debt, proposing adjustments to the price cap to ensure suppliers can recover their reasonable costs and provide support to consumers managing their debts.
Future Considerations for the Price Cap
While the price cap has helped protect consumers from a volatile gas market, Ofgem acknowledges its limitations and the changing energy sector. The regulator suggests that the way the price cap works may need to change in the future to continue protecting consumers effectively. Ofgem’s proposed adjustments aim to recover costs fairly without penalizing a specific group of customers.
Winter Support Measures
Ofgem has implemented measures to help consumers struggling to pay their bills this winter. These measures, effective from Thursday, include rules on the offer of debt repayment plans and holidays to provide support and flexibility to consumers facing financial challenges during the winter months.
Source: news.sky.com
