Energy hike to hit the poorest

Ofgem to raise price cap again

FIVE million of Britain’s poorest households are set to be hit with a second wave of energy price hikes in the space of just six months.

Industry regulator Ofgem yesterday announced plans to increase a price cap that was supposed to protect prepayment meter customers and others who get the Government’s Warm Home Discount.

Its “safeguard” tariff limits what suppliers can charge. But Ofgem will raise the cap by £47 a year from October 1, meaning customers could be paying up to £1,136 for their gas and electricity.

Ofgem last raised the cap in April, by £57 a year. Both times Ofgem said it was because suppliers had seen a sharp rise in wholesale energy costs.

Dermot Nolan, chief executive of Ofgem, said: “Any price rise for customers is unfortunate.” But the move triggered a backlash. According to the Moneysavingexpert website, many prepayment meter and vulnerable customers will be paying just £70 a year less than the average household on a standard variable tariff, often among the suppliers’ most expensive deal.

Alex Neill, from consumer group Which?, said: “It demonstrates why energy companies should be doing much more to get all their customers off expensive tariffs.”

Experts say customers on prepayment meters could save up to £150 a year by switching to a cheaper deal.

Rik Smith, from the website uSwitch.com, said: “Even if a prepayment customer is in debt to their supplier, they can still switch, as long as the debt is under £500 per fuel and the new provider agrees to take on the debt.”

Ofgem’s announcement could also pave the way for more price rises for 11 million households on standard variable tariffs.

Suppliers used April’s increase in the safeguard cap as justification for unleashing increases for other customers too. Ofgem is set to introduce a price cap on these standard variable deals later this year. But evidence from the safeguard cap experience suggests it will not prevent bills rising.