MILLIONS of households face a new energy bill hike – and it’s to help prevent suppliers from going bust.
Britain’s energy watchdog is considering a one-off increase to the energy price cap of up to £17 a year.
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Ofgem said it was considering the one-off increase in the price cap – worth £1.50 a month on average – “to reduce the risk of energy firms going bust or leaving the market as a result of unrecoverable debt”.
It said it was launching a consultation on options to protect the energy market after figures in the summer showed that debt reached a record £2.6billion due to soaring gas prices and cost of living pressures on households.
It warned that if it did not take action, consumers could face even higher costs and poorer standards of service if suppliers collapsed due to the debt levels.
The regulator is consulting the energy industry, consumer groups and the wider public to look at the options.
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But it said, if approved, any increase to the cap would be delayed until next April to protect consumers from extra costs during the winter.
Tim Jarvis, director general for markets at Ofgem, said: “We know that households across the country are struggling with wider cost-of-living challenges, including energy, so any decision to add costs to the price cap is not one we take lightly.
“However, the scale of unrecoverable debt and the potential risk of suppliers leaving the market or going bust, which passes on even greater costs to households, means we must look at all the regulatory options available to us.
“Ofgem cannot subsidise energy or force businesses to sell it at a loss and suppliers must be in a position to offer high-quality services to customers.
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“We must consider the fairest way to maintain a stable energy market and we will do this in consultation with all our partners to ensure we are protecting the most vulnerable households.”
Ofgem said that at the height of the energy crisis when around 30 suppliers went out of business, it charged every energy customer an extra £82 to cover costs to ensure that households were not cut off.
It said its latest proposals would have varying impacts on customer bills, depending on payment types.
But Simon Francis, coordinator of the End Fuel Poverty Coalition, said the Government should instead look to help customers pay off energy debts.
He said: “Households are struggling under the huge weight of energy debt which has been caused through no fault of their own, but by rising prices.
“All this time, energy firms have continued to profit from the misery of people racking up debt and living in cold damp homes.
“Rather than pass on more increases to energy bills, the Government needs to work with energy firms to introduce a ‘help to repay’ scheme to help get Britain’s households back on to an even keel.”
Wholesale gas prices rose by 250% in 2021, creating a strain on the UK energy industry.
This has led to a number of energy firms going bust.
Bulb fell into administration in November 2021, leaving 1.5million customers in limbo as the government was forced to step in and bail it out.
But Octopus Energy has now taken over Bulb’s customer base.
In total, 28 smaller energy suppliers collapsed between January and December 2021.
Utility Point and People’s Energy were two of the first to fold, along with a host of other small providers who met the same fate.
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Small energy firms Green and Avro then joined the growing list of providers ceasing trade, leaving a combined 835,000 customers without a supplier.
Igloo, Symbio Energy and Enstroga all collapsed in one blow at the end of September 2021, with roughly 233,000 customers left in the lurch.
