Energy price cap ‘plays with vulnerable families’ lives and budgets’
Five million vulnerable consumers will now come under the energy safeguard cap as part of the scheme’s extension, but from April the maximum amount will rise.
The government’s energy safeguard tariff stops suppliers from charging customers too much.
Introduced last year, it initially protected four million consumers from unjustified price rises. The scheme has now been extended to a further million people who receive the Warm Home Discount.
However, the maximum level of this safeguard cap will increase from April. Currently for dual fuel prepayment customers, the cap is set at £1,031, but will rise by £58 to £1,089.
Ofgem said these consumers will only see an increase of around 3.7% in their bills compared to an average 8% increase of dual-fuel standard variable tariffs of the Big Six last year. It added that once the safeguard is in place, bills are expected to still be around £35 lower than the current standard variable tariffs paid by direct debit customers.
The response to this has been anything but warm. Stephen Murray, energy expert at MoneySuperMarket, said this isn’t convincing from Ofgem.
“What’s the point of putting a price cap in place for vulnerable customers if you’re going to potentially raise prices twice a year anyway? Ofgem saying customers are “better off” will create the increased apathy that the cap is likely to drive and stop those most in need of saving hundreds of pounds more.
“This really is further evidence, if it was needed, that price caps, whether for vulnerable customers or the 15 million households stuck on expensive standard variable tariffs, just don’t work. The savings sound impressive in the political and regulatory sound bites, but as we’ve seen today just don’t stack up and can’t be maintained once wider influences come into play, such as wholesale energy and policy costs.”
Murray added that by switching tariffs, households could save £250 or more.
John Penrose MP who has called for the energy price cap to be extended to all 17 million families on expensive standard variable tariffs, said: “Ofgem seems to think it can predict what the wholesale price of energy will be in the summer, and set its price cap accordingly.
“But any energy trader will tell you that’s impossible. No-one’s that clever, and certainly not a slow-moving regulator.
“Wholesale energy prices change every day, so customers aren’t helped by a regulator that meets every six months to pick a number which is out-of-date as soon as it is announced.
“The government’s own adviser, Professor Dieter Helm, says official energy forecasting has produced ‘spectacularly bad’ results. And yet here it is, playing with vulnerable families’ lives and budgets by having another go.”