Ofgem to raise energy price cap as households face £3billion unpaid bills

15 December 2023 , 09:06

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Ofgem wants to introduce a one-off rise to its price cap (Image: Getty Images)

Ofgem has revealed plans to raise the energy price cap from April next year to help suppliers recover nearly £3billion in debts.

The energy watchdog has proposed a one-off rise of £16 between April 2024 and March 2025, the equivalent to around £1.33 a month. Customers on pre-payment energy meters will not be affected.

Ofgem says the increase will help suppliers set up payment plans and write off some debt for struggling customers. However, it comes as energy prices remain high, with the Ofgem price cap set to rise from £1,834 for a typical dual fuel household to £1,928 from January 1.

The price cap sets the maximum rate energy firms can charge per kilowatt (kWh) hour for gas and electricity you use, along with standing charges. Standing charges are what you have to pay no matter how much energy you use.

The headline figure is what a direct debit customer with "typical energy consumption" can expect to pay each year based on wholesale energy prices. The price cap is slightly different if you're a prepayment customer, or if you pay on receipt of bill.

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Tim Jarvis, Director General for Markets, said: “The proposals set out today are not something we take lightly. However, we feel that they are necessary to address this issue. This approach will ensure the costs are recovered fairly, without penalising a particular group of customers.

“The price cap has helped to protect consumers from a volatile gas market. However, it remains a blunt instrument in a changing energy sector, and the way it works may need to change in the future, so customers continue to be protected.”

Ofgem yesterday introduced new rules that mean energy firms must contact vulnerable customers if they miss payments. Energy companies must contact vulnerable customers if they miss two monthly or one quarterly payment payments, to see if they are struggling to pay their bills.

Energy firms must then offer payment plans or repayment holidays if appropriate. Companies will also need to show their Citizens Advice customer service rating so households can compare them on things like call waiting times and the quality of their help.

Levi Winchester