Ofgem Plans One-Off Increase: British energy regulator Ofgem is exploring a one-time energy bill price cap rise to address the exceptional issues of roughly £3 billion ($3.8 billion) of customer energy debt. The move attempts to limit the possibility of energy suppliers going bankrupt due to consumer debt amassed amid rising wholesale energy costs.
The surge in energy prices, driven by geopolitical events such as Russia’s invasion of Ukraine, led to record-high energy prices in the previous year. To alleviate the impact on consumers, the government imposed a cap on energy prices, which stood at an average of £2,500 ($3,191) in January for most households. While the cap has since decreased, with an average of £1,928 per year set for January, energy prices remain historically high.
Ofgem expressed concern over the escalating level of energy debt, reaching an all-time high due to the combined effects of soaring prices and broader cost-of-living pressures. To address this challenge, Ofgem is considering a one-off adjustment of £16 per customer. This adjustment, equivalent to approximately £1.33 per month, is proposed to be implemented between April 2024 and March 2025.
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Tim Jarvis, Ofgem’s Director General for Markets, emphasized the need for action to ensure that suppliers can recover their reasonable costs. The goal is to maintain market resilience and enable suppliers to offer consumers support in managing their debts effectively.
Ofgem’s proposal also includes measures to protect specific customer groups, suggesting that any additional costs would not be passed on to customers using prepayment meters for their energy. This targeted approach aims to prevent penalizing a particular segment of customers, emphasizing fairness in cost recovery.
Jarvis acknowledged the gravity of the situation, noting that the proposed approach is not taken lightly. The regulator aims to strike a balance between addressing the financial challenges faced by energy suppliers and ensuring that costs are recovered equitably without disproportionately impacting vulnerable consumer groups.