Households face paying higher energy bills next year to help protect energy firms against soaring consumer debt.
Energy regulator Ofgem is planning to put its price cap up by £16 between April 2024 and March 2025, meaning the average customer would pay an extra £1.33 a month.
The Ofgem price cap limits how much energy firms can charge customers on variable-rate tariffs paying by direct debit – currently more than 80 per cent of UK homes.
The price cap is currently £1,834 a year for average energy use, going up to £1,928 a year from January 1.
Ring the changes: Ofgem plans to put bills up to stop suppliers collapsing over unpaid debt
Ofgem wants to put the price cap up in April 2024 to cover what it calls ‘bad debt’ – meaning unpaid customer energy bills.
The regulator said consumers currently owe energy firms a record high of £3billion.
Ofgem said this is ‘unlikely to be repaid’ and added that ‘it is crucial that the regulator ensures that the burden of this increased debt falls as fairly as possible’.
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Not putting energy bills up risks suppliers failing, which could be an even worse outcome for consumers, Ofgem said.
Around 30 energy firms failed when energy prices began soaring in late 2021.
There will be no extra charge for customers who use pre-payment meters, however.
This is because it is difficult to build up significant debt to an energy firm with a pre-payment meter.
The energy regulator said power companies also needed to charge extra to pay for the costs of meeting its new rules on customer service, brought in earlier this week.
Ofgem director general for markets Tim Jarvis said: ‘We have taken steps to ensure energy firms are taking better care of customers and treating people struggling with debt fairly, through our robust consumer standards, and that companies are getting in touch to offer support, such as affordable payment plans, where needed.
‘However, the record level of debt in the system means we must take action to make sure suppliers can recover their reasonable costs, so the market remains resilient, and suppliers are offering consumers support in managing their debts.
‘The proposals set out today are not something we take lightly. However, we feel that they are necessary to address this issue. This approach will ensure the costs are recovered fairly, without penalising a particular group of customers.’
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