Five Million Households Face Energy Price Rise
Approximately five million households in the UK are to see their energy bills rise by £47 per year. Though for once it is not because of the suppliers themselves raising their prices. This particular rise is because the energy industry regulator Ofgem is raising the safeguard limit. This is in response to the rising global and wholesale costs of supplying the UK’s energy. We explore the imapcts of the energy price rise below.
Pre-Payment Meters and Vulnerable Customers
Since February of this year, when the Government extended the safeguard tariff to cover an extra million customers on standard variable tariffs as well as those receiving the Warm Home Discount, the safeguard tariff now protects five million prepayment meters and other vulnerable customers from being overcharged by the more expensive tariffs.
The safeguard limit is now being increased to £1,136 for dual fuel customers. The raise taking effect from October onwards.
How the Safeguard Tariff Works
The millions of affected households include many of the UK’s most vulnerable customers. The safeguard tariff is intended to protect these customers. But Ofgem also has a responsibility to ensure energy bills accurately reflect the real wholesale costs that the suppliers must pay.
The safeguard tariff is basically a price protection initiative, with Ofgem stating that:
“The retail market is not working for consumers who remain on their supplier’s default deal. Our work, and the Competition and Markets Authority’s investigation, has shown there is little competitive constraint on the prices suppliers charge these customers. As a result, millions of consumers are paying more than they should be.
“We are particularly concerned with the impact this has on vulnerable consumers. These consumers are more likely to find themselves on a default deal [such as the standard variable tariffs], and because of their circumstances, can suffer more harm as a result.”
Rising Wholesale Energy Costs
The safeguard dictates that energy suppliers keep their prices below the level of the stated limit. This limit reviewed and adjusted twice a year to allow for increases such as those associated with the current rising wholesale costs. Unfortunately at the moment we are witnessing a global rise in oil prices. This is having a knock-on effect on wholesale gas prices. This means energy prices across the board are going up for everybody, customers and suppliers alike.
The Chief Executive of Ofgem, Dermot Nolan, 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.”
Want to learn more about avoiding the energy price rise, switching energy supplier and identifying the best available tariff for you? Get in touch with Business Save’s team of highly experienced energy experts.