Ofgem has lifted the maximum amount energy companies can charge vulnerable customers on variable tariffs to £1,136 a year following a rise in wholesale energy costs.
The energy regulator said its safeguard tariff, which is designed to protect 5 million prepayment meter and vulnerable households, would rise by £47 a year for dual fuel customers from 1 October.
Ofgem explained that since the tariff was last updated in February, the global rise in oil prices had fed through to wholesale gas prices, impacting domestic heating and electricity generation.
Rik Smith, energy expert at uSwitch.com, said: “This is a stark reminder that even when there is a cap in place, prices can still rise.”
The only way prepayment customers can truly protect themselves is to switch to a cheaper deal or fix their tariff, he 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.
“The cheapest prepayment tariff is currently £159 lower than what the new cap will cost from October, but this is still one of the most expensive ways a household can pay for their energy,” Smith added. “If possible, switching to a credit meter and taking advantage of some of the cheapest deals or longer fixes on the market is a much cheaper way to pay for a household’s energy.”
The safeguard tariff was introduced in April 2017 and was extended in February to a further 1 million people who are on standard variable tariffs and receive the government’s warm home discount for people on certain benefits. The tariff is adjusted twice a year.
The regulator is working on a price cap for the remaining estimated 11 million households on “poor value” default tariffs by the end of the year, following publication of a consultation later this month.
Dermot Nolan, Ofgem’s chief executive, said: “Any price rise for customers is unfortunate. But while the level of the tariff will rise in October, these customers can be confident that this increase is justified and that their energy bill reflects the real cost of supplying gas and electricity. There are also better deals on the market for those who want to save even more money by switching.
“Ofgem is working to put in place price protection for 11 million more households on poor value deals so that everyone pays a fairer price for their energy.”
