Energy regulator Ofgem is considering raising its price cap by £16 between April 2024 and March 2025 to counter soaring consumer debt. This move is intended to protect energy firms facing a record high of £3 billion in unpaid customer energy bills. The proposed increase would mean an average monthly rise of £1.33 for customers on variable-rate tariffs paying by direct debit, covering what Ofgem terms as ‘bad debt.’
Unprecedented Debt Levels
With consumers owing energy firms an unprecedented £3 billion, Ofgem aims to ensure the fair distribution of the increased debt burden. Failing to adjust energy bills could lead to supplier failures, a situation Ofgem deems worse for consumers. The proposed increase is essential for maintaining market resilience and supporting consumers in managing their debts.
Exemption for Pre-payment Meter Users
Customers using pre-payment meters will not face an extra charge, as these meters make it challenging to accumulate significant debt. Ofgem emphasizes the need for energy companies to charge extra to cover the costs of complying with its new customer service rules introduced earlier this week.
Necessary Measures for Resilient Markets
Tim Jarvis, Ofgem’s Director General for Markets, acknowledges the necessity of the proposed measures, emphasizing that they are crucial for addressing the record-level debt in the system. Ofgem aims to ensure fair cost recovery without penalizing a specific group of customers, balancing the interests of both consumers and energy suppliers.
Future Warning: Potential Rise in Bills to Compensate Gas Networks
Ofgem has issued a warning that energy bills could increase by £43 per year from 2026 to compensate gas networks for the UK’s net-zero drive. As gas usage slows down due to initiatives like the heat pump rollout, private gas network companies may face financial losses on their investments. Ofgem stresses the need for government intervention to prevent consumers from experiencing higher gas bills.
In conclusion, Ofgem’s proactive measures aim to navigate the challenges posed by rising consumer debt, ensuring a fair and balanced approach that safeguards both the energy market and consumers.
Source: dailymail.co.uk
