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Ofgem to cut one million vulnerable households’ bills

Almost one million vulnerable households on poor value deals will begin to make savings on their energy bills this month, after Ofgem extended the prepayment safeguard tariff.


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Ofgem said these customers will initially make annualised savings of around £115, on average, because suppliers have to cut their prices to below the level of the safeguard tariff cap.

 

The regulator said these savings will fall to around £66 a year from April, when the level of the safeguard tariff rises due to higher energy costs.

 

The safeguard tariff stops suppliers from charging customers too much and ensures any price increase is justified by rises in underlying costs.

 

Ofgem adjusts the level of the cap twice a year based on a pre-defined methodology set by the Competition and Markets Authority to reflect the estimated underlying costs of supplying energy.

 

From April 1, the level of the safeguard tariff will rise by around £57 a year, from £1,031 to £1,089, for a dual fuel customer who uses a typical amount of energy.

 

Ofgem said the increase in the safeguard tariff is mainly due to higher wholesale energy costs and policy costs to support low carbon forms of electricity generation.

 

The regulator said while higher energy costs will push up the level of the safeguard tariff in April this year, customers will still pay less than they would be if they were not protected.

 

For example, their bills which used to be amongst the highest in the market, are still expected to be around £35 lower than the current standard variable tariff paid by direct debit customers.

 

Dermot Nolan, chief executive of Ofgem, said: “Even when energy costs rise, people on the worst deals are better off under the safeguard tariff as they can be sure that they are not overpaying for their energy and any rise is justified.

 

“Ofgem is working with the government to protect all customers on poor value default deals, such as standard variable tariffs, from being charged too much for their energy as soon as possible. Our aim is to protect those who do not switch, while making it easier for those who do to get a better deal.”

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