Household energy bills to increase, but safeguard is extended

More than five million households are to see their energy bills rise by around £57 a year after the regulator announced it was hiking a price cap aimed at protecting vulnerable and pre-payment customers.

Ofgem said it was increasing the level of its safeguard tariff from April 1, meaning the average dual fuel bill will rise from £1,031 to £1,089 a year due to higher gas and electricity costs.

It comes after the energy watchdog extended its safeguard tariff to almost one million vulnerable customers on February 2, taking the total number of households protected by the energy tariff to more than five million.

Ofgem, which introduced the safeguard tariff in April last year, insisted households on the tariff would still be better off despite the price rise.

It said their bills – which used to be among the highest in the market – would still be around £35 lower than the standard variable tariff paid by direct debit customers.

Dermot Nolan, chief executive of Ofgem, said: “We have extended the prepayment safeguard tariff to almost one million vulnerable households, which will help deliver a fairer, smarter and more competitive market for all consumers.

“Even when energy costs rise, people on the worst deals are better off under the safeguard tariff as they can be sure they are not overpaying for their energy and any rise is justified.”

Ofgem updates the safeguard tariff every six months based on the estimated cost of supplying energy and said the increase follows rises in wholesale gas and electricity costs as well as increased government policy costs.

Last week’s move saw the tariff extended to almost one million people who are on their provider’s standard variable tariff (SVT) and get the Warm Home Discount.

These customers will initially make savings of around £115 a year on average because suppliers have to cut their prices to below the level of the safeguard tariff cap.

However, these savings will fall to around £66 a year from April when the cap is increased.