Tag: Ofgem

Ofgem ‘transformed’ to strengthen protections for energy consumers

Billpayers ‘set to benefit from a stronger energy regulator to ensure they are treated fairly’

  • Energy regulator Ofgem reformed to introduce stronger protections for consumers
  • Households supported with faster redress if they are let down by their supplier
  • Energy executives incentivised to act in consumers’ best interests

Billpayers are set to benefit from a stronger energy regulator, under reforms of its remit set out by the government today (22 April). 

The transformation will empower the regulator to ensure energy consumers are treated fairly, including measures to guarantee good practice in the market. This is the first major update to Ofgem’s scope since the regulator was founded in 2000. 

The comprehensive overhaul will give Ofgem new powers to act as a true consumer champion, including: 

  1. Stronger powers for the regulator to enforce consumer law directly, meaning it will no longer need to go through a lengthy courts process to make sure customers get what they are owed if companies treat them unfairly; 
  2. Measures to ensure energy bosses act on behalf of consumers, with powers for Ofgem to ban their bonuses if they break the rules;  
  3. Reforms to the regulator’s remit to focus on economic and consumer protection and ensure every energy consumer is protected, including the ability to regulate in new areas of the market if needed. 

Since Ofgem was established, the market has grown more complex, with a wider range of products and services for consumers to choose from – with growing numbers of customers in parts of the market which are covered by little, if any, regulation. 

That includes heating oil customers, who have seen prices spike following the start of the ongoing conflict in the Middle East. Last month the government announced funding worth over £50 million to support low-income families reliant on heating oil, and committed to introducing new consumer protections to the sector.  

The changes announced today mark another step in that process, transforming Ofgem so that it is fit for the future and can ensure all consumers in today’s energy market are supported. 

Energy Secretary Ed Miliband said:  “This Government is fighting people’s corner, and today we set out steps to strengthen protections for energy consumers.

“This includes tough and fair measures to ban energy company bonuses if they break the rules.”

Minister for Energy Consumers Martin McCluskey said: “Every household must be given a fair deal, and today, we transform our energy regulator to give families stronger protections. 

“We’re giving Ofgem stronger powers to fight consumers’ corner, changing their remit so they can protect every consumer, and introducing new measures so they can hold energy executives to account. 

“We’re making the market work for those who use it, working with the regulator to make sure customers are put first. 

“We will continue to stand up for working people and fight their corner as we tackle the affordability crisis – our number one priority.”

Interim Ofgem CEO Tim Jarvis said: “Great Britain’s energy system is going through the biggest changes in our lifetimes, and the regulator needs to be able to keep pace with that change.

“This review sets out ambitious, necessary reforms that will enable Ofgem to meet the challenges of regulating an increasingly electrified and flexible energy system and protect consumers so they can engage confidently in markets offering new products and services.   

“We have delivered significant reforms in recent years, but this review enables us to make changes at a more systemic level to ensure we are delivering an energy system that works for consumers, that is attractive to investors and provides a stable, reliable environment for participants in the industry.

“With the tools, remit and clarity to deliver this, we look forward to working with the Government, consumer representatives and the energy sector to drive the change that’s needed – both in Ofgem and across the energy sector.”

To deliver the shift, Ofgem’s remit will be streamlined to focus on its core functions as an economic and consumer protection regulator. This involves removing Ofgem’s responsibility for oversight of home upgrade schemes in a role that is set to be performed within government by the Warm Homes Agency. 

This will help equip Ofgem to drive forward clean power and economic growth, ensuring regulation supports innovation, unlocks investment in Britain’s electricity networks, and helps to modernise the energy system.  

Ofgem’s capabilities will also be reformed, with its technical expertise strengthened, its use of data improved and its approach to risk reassessed – enabling the regulator to take faster decisions in the interests of consumers. 

They will also develop a workforce plan, building on changes already underway, to ensure staff have the right skills to deliver the changes required, supported by stronger board‑level oversight of skills and culture. 

The changes build on the reforms the government and regulator have already delivered to rebuild the energy retail market and improve standards in the sector – driving customer satisfaction with their suppliers to record highs.   

They follow the government’s proposals to protect energy consumers with fairer, quicker and easier access to compensation when they are let down, as well as Ofgem’s plans to make sure suppliers’ Guaranteed Standards of Performance reflect the evolving energy system. 

The plans come as the government is continuing to fight people’s corner in response to the impacts of the conflict in the Middle East. Yesterday (21 April) the Energy Secretary set out plans to go further and faster on the mission to make the UK a clean energy superpower and protect people from the increasing global fossil fuel price shocks. 

Gillian Cooper, Director of Energy at Citizens Advice said: “We welcome the actions set out in the review, which will strengthen consumer protections, enable a fair transition to green energy and give Ofgem the tools it needs to enforce the rules. 

“Ofgem should now seize the opportunity to bring about a more innovative market, with better choices and protections for consumers, ensuring energy suppliers know there are real consequences for falling short.

“Effective regulation is one pillar which underpins a well-functioning energy system.  But consumers also need strong advocacy, trusted advice and the ability to get problems sorted quickly and fairly, so they can make informed decisions and know they won’t be left out of pocket if things go wrong.”

Laura Sandy CBE, Chair of the Energy Network Innovation Taskforce and Green Alliance said: “Excellent to see that the review is focused on the clarity of Ofgem’s role, streamlining its role to become a truly modern regulator, moving from technology-based regulation to a consumer centric model and being responsible for driving growth.  

“While, consumer protection and network regulation are the core functions, I hope that these roles also mean driving growth, unlocking wider societal opportunity and delivering customers greater choice.  

“The culture within the organisation is a strong theme throughout with the need to move from a process, input regulator, to a dynamic opportunity and risk regulator.  Crucially there are excellent recommendations around independent assessment on progress supporting Ofgem in the delivery of their new remit.”

Changes to energy price cap between 1st October and 31 December 2025

Changes to the maximum amount energy suppliers can charge people on default tariffs for each unit of energy and the daily standing charge

Every 3 months Ofgem review and set a level for how much an energy supplier can charge for each unit of energy and daily standing charge, under the price cap.

From 1 October to 31 December 2025 the price for energy for a typical household who use electricity and gas and pay by Direct Debit will go up by 2% to £1,755 per year. However, compared to the start of 2023, this is £625 (26.3%) lower than when the energy crisis was at its peak.

For a typical household, their energy bills will increase by £2.93 a month or £35.14 per year. This is 2.2% per year higher than the price cap set for the same period last year, from 1 October to 31 December 2024 (£1,717).   But when adjusted for inflation, it is 0.9% lower than the same period in 2024.  Based on the current inflation rate, a typical household will pay £102 from October to December instead of £100 per month.

Costs included in the energy price cap

The level of the energy price cap is made up of different costs, for example the wholesale cost of gas and electricity, costs to supply energy on the network and VAT. These costs are split within the energy price cap between the unit rate and the standing charge.

We are consulting on some of these costs which could impact future energy prices. View all our latest consultations and call for inputs related to the price cap.

Read about typical household energy use and how the energy price cap is calculated on our Average gas and electricity use explained page.

View and compare 1 October to 31 December 2025  and 1 July to 30 September 2025 energy price cap standing charges and unit rates by region.

Learn more about the costs that make up the standing charge for electricity and gas.

You can also get and compare all the energy price cap (default tariff) levels.

Energy price cap rates 1 October to 31 December 2025

Electricity rates

If you are on a standard variable tariff (default tariff) and pay for your electricity by Direct Debit, you will pay on average 26.35 pence per kilowatt hour (kWh). The daily standing charge is 53.68 pence per day. This is based on the average across England, Scotland and Wales and includes VAT.

Gas rates

If you are on a standard variable tariff (default tariff) and pay for your gas by Direct Debit, you will pay on average 6.29 pence per kilowatt hour (kWh). The daily standing charge is 34.03 pence per day. This is based on the average across England, Scotland and Wales and includes VAT.

Why energy prices have gone up

There have been increases to parts of the costs of transporting energy in Great Britain (England, Scotland and Wales). Network operators are adjusting costs based on the level set by the National Electricity System Operator so that electricity supply is secure.

Other costs that go towards government schemes and essential support are also a factor for this increase.

Managing your energy bills and tariff

You are covered by the energy price cap if you are on a default tariff and pay for your electricity and gas by either:

  • standard credit (payment made when you get your electricity and gas bill)
  • Direct Debit
  • prepayment meter
  • Economy 7 (E7) meter

The actual amount you pay will depend on how much energy your household uses, where you live and the type of meter you have.

You could pay less for your energy by changing your energy tariff or payment type. Find out if you can change or fix your tariff and how to switch energy supplier.

Tell your energy supplier if you cannot pay your bills. They must help you if you ask. They could set up a repayment plan or provide you with emergency credit.

What we are doing to help customers

Consumers will have more choice and control in how they pay for their standing charges. Some suppliers are already offering these tariffs. See our update on creating a low or zero standing charge option. 

We are reviewing how we allocate costs, and the impact of investments and upgrading infrastructure on customers’ bills. This will help make sure that the costs recovered are fair to consumers and efficient. 

Next energy price cap review 

We review and set a level on how much an energy supplier can charge for each unit of energy including the standing charge every 3 months. The levels for the period 1 January 2026 to 31 March 2026 will be published by 25 November 2025.

RTS Electicity Meter? ACT NOW!

The technology that supports RTS electricity meters will switch off from 30 June 2025. Without the technology to tell RTS meters when to swap between peak and off-peak rates, they may no longer work properly, and it may mean that a consumer’s heating and hot water supply stops functioning as normal.

If you have an RTS meter, your electricity supplier will get in touch to arrange an upgrade to a smart meter before this deadline.

They must make sure you have a suitable meter installed, and that your service is not disrupted.

OFGEM expect electricity suppliers to replace all RTS meters before the Radio Teleswitch Service technology ends.

TV presenter Lorraine Kelly explains how you can identify if you have a Radio Teleswitch (RTS) meter and what action you should take to upgrade your meter.

Support to upgrade RTS electricity meters

We are working with energy suppliers, distribution network operators, consumer groups and others as part of the RTS Taskforce to support people with an RTS meter. Read more information about the RTS Taskforce.

If you have an RTS meter your electricity supplier will contact you to arrange an appointment to upgrade your electricity meter. You should arrange an upgrade of your meter to avoid losing heating or hot water after 30 June 2025.

Find out if you have an RTS meter

You may have an RTS meter if:

  • your home has a separate switch box near your meter with a Radio Teleswitch label on it
  • your home is heated using electricity or storage heaters
  • there is no gas supply to your area, including households in rural areas and high-rise flats
  • you get cheaper energy at different times of day, for example, you might be on an Economy 7, Economy 10, or Total Heat Total Control tariff

Get in touch with your electricity supplier if you’re still not sure which meter is in your home.

If you do not know who your supplier is, follow the steps on our find your energy supplier page. 

Contact your electricity supplier to upgrade your RTS meter

If you have an RTS meter in your home, view details on your electricity supplier’s website to upgrade your meter.

If you run a business that has an RTS meter, view details on your electricity supplier’s website to upgrade your meter.

If you do not know who your supplier is, follow the steps on our find your energy supplier page.

Upgrading to a smart meter

A smart meter will give you a similar service to your RTS meter. You’ll also get other benefits, including:

  • electricity readings submitted automatically
  • access to ‘smart meter only’ tariffs
  • the ability to monitor your energy usage
  • accurate bills based on the electricity you’ve used, not estimates

Find out more about getting a smart meter.

If you’re not able to upgrade

In some instances, your supplier may not be able to offer you a smart meter at the moment.

If this is the case, they must make sure you have a suitable meter installed, and that your service is not disrupted.

You should contact your supplier to understand the options available to you. 

If you do not want a smart meter

Upgrading to a smart meter is the best option for RTS customers. If you choose not to upgrade:

  • your heating and hot water may be left continually on or off
  • your electric storage heaters may charge at the wrong time of day, possibly leading to higher bills
  • your supplier may be unable confirm your electricity usage during peak or off-peak times, and your electricity costs may be higher than before
  • you’ll have a more limited choice of tariffs.

Talk to your supplier for more information

If you live in Scotland, you can get advice and information on energyadvice.scot.

Taking us for April Fools? Energy price cap to rise by 6.4% from 1st April

HOUSEHOLDS FACE MORE MISERY WITH YET ANOTHER ENERGY PRICE HIKE

Energy regulator Ofgem has today [Tuesday 25 February 2025] announced a 6.4% increase of the energy price cap for the period covering April to June 2025.  

A recent spike in wholesale prices is the main driver of today’s price rise, accounting for around 78% of the total increase. A small increase in policy costs and associated inflationary pressures make up a further 22%.

The price cap – which sets a maximum rate per unit and standing charge that can be billed to customers for their energy use – will rise by £111 for an average household per year, or around £9.25 a month, over the three-month period of the price cap.

For an average household paying by Direct Debit for dual fuel this equates to £1,849 per year. This is 9.4% (£159) higher than this time last year (£1,690) but £531 (22%) lower than at the height of the energy crisis at the start of 2023, when the Energy Price Guarantee was in place.

Since Ofgem’s last price cap announcement in November 2024, four million customers have moved to a fixed tariff. Now, 11 million people are on a fixed deal and won’t be affected by the change in the price cap. This is the largest movement of customers coming off the price cap and on to a fixed deal since the energy crisis.

Jonathan Brearley, CEO of Ofgem, says: “We know that no price rise is ever welcome, and that the cost of energy remains a huge challenge for many households.

“But our reliance on international gas markets leads to volatile wholesale prices, and continues to drive up bills, which is why it’s more important than ever that we’re driving forward investment in a cleaner, homegrown system.

“Energy debts that began during the energy crisis have reached record levels and without intervention will continue to grow. This puts families under huge stress and increases costs for all customers. We’re developing plans that could give households with unmanageable debt the clean slate they need to move forward.

“We welcome the government’s support for these plans, and their plans to expand the Warm Home Discount, which will also offer financial help to nearly three million more households that need it most.

“If anyone is worried about paying their bills, I would urge them to reach out to their supplier to make sure they’re getting all the help they can. Where possible, switching or fixing tariffs now could also help to bring costs down and provide certainty over coming payments.”

From 1 April, Britain’s standing charges will reduce for most households, but some regional variation remains. As a result, some households will see a small increase in standing charges of up to £20 per year for a typical dual fuel consumer. This is due to changes in network costs – the price paid to transport energy around the country and power Britain’s homes.

Ofgem is also today welcoming the government’s support of its plans to tackle the growing impacts of rising debt in the energy system and create lasting change in the way debt is managed and customers in debt are supported.

The plans could see a Debt Relief Scheme established, which suppliers would use to either write off debt that is so significant it will never be paid back or help pay off debt by ‘debt matching’ customer payments.

The Debt Relief Scheme would form part of a wider package of measures, supported by the Government’s proposed expansion of the WHD, which aims to reduce debt to levels seen before the energy crisis reducing costs to all consumers by £25-30 per year*.

The regulator has also set out ambitions to improve the standard of service from suppliers when supporting customers that are struggling to pay their bills. The proposals would make it easier for consumers to get help from charities and debt support agencies and ensure a consistent approach is taken across the board, to help to limit the risk of unsustainable levels of debt building up in the future once again.

The plans have also received backing from a number of stakeholders, who recognise how important the scheme could be for helping those in severe payment difficulty to get back on track, while also encouraging more onto repayment plans, driving down debt costs for all.

The regulator continues to encourage customers to look for the best deal to help keep their household bills down and to consider switching to a new supplier or fixing to a tariff with their existing supplier. There are a number of fixed, Direct Debit tariffs tracking below the April price cap level, with savings of around £50 available compared to the upcoming price cap level.

Backbench Labour MP Richard Burgon said: The so-called energy regulator Ofgem says energy bills from April will rise by 6.4%. The Government must step in and impose a real price cap and tax energy profits more to provide extra help to people.

“And to end this rip off, we must bring energy back into public ownership.”

Happy New Year? Energy price cap will rise by 1.2% from January

Energy regulator Ofgem has today (Friday 22 November) announced a 1.2% increase of the energy price cap for the period covering January-March 2025.  

The change to the price cap – which sets a maximum rate per unit and standing charge that can be billed to customers for their energy use – will rise by £21 for an average household per year or around £1.75 a month. 

For an average household paying by Direct Debit for dual fuel this equates to £1,738 per year. This is 10% (£190) cheaper compared to January-March 2024 (£1,928) and 57.2% (£2,321) less than the energy crisis (January-March 2023). 

It comes as analysis by Ofgem shows around 1.5million households switched tariff over the past three months. The regulator is urging customers to take advantage of the rising choice in the market and look for the best deal to help keep their household bills down. By switching, savings of up to £140 are currently available.

Following a call by Ofgem in August for suppliers to offer more choice with low and no-standing charge tariffs, there has been an increase in the number of suppliers offering these kinds of deals. There are currently 8 available that are at least 10% below the level set in the price cap. 

However, while these come with a lower standing charge, they do have a higher unit rate. They could benefit customers with lower energy usage but will not work for everyone so consumers should carefully consider what works for them. 

Tim Jarvis, director general of markets at Ofgem, said: “While today’s change means the cap has remained relatively stable, we understand that the cost of energy remains a challenge for too many households.

“However, with more tariffs coming into the market, there are ways for customers to bring their bill down so please shop around and look at all the options.

“Our reliance on volatile international markets – which are affected by factors such as events in Russia and the Middle East – means the cost of energy will continue to fluctuate. So it’s more important than ever to stay focused on building a renewable, home-grown energy system to bring costs down and give households stability. 

“In the short term though, anyone struggling with bills should speak to their supplier to make sure they’re getting the help they need and look around to make sure they’re on the best, most affordable deal for them.” 

The regulator is encouraging customers to consider the way they pay their bills. Around 5 million customers pay by standard credit payments – which means paying for energy after it has been used. But this is much more expensive, particularly over the winter months.

Customers could save £100 by simply switching from standard credit payments to Direct Debit payments or smart PPM, which remains the cheapest way to pay for energy.

The cheapest deal on the market could save a typical dual fuel customer £210 compared to the upcoming price cap level. However, this requires signing up for an additional boiler cover service. 

There are other cheaper fixed deals on the market which don’t require additional services that could save customers more than £140 per year compared to the upcoming cap level. 

If consumers are worried about paying their bills, they can contact their supplier for support. Ofgem’s rules mean they must work with their customers to agree an affordable payment plan. They may also be able to help by offering more time to pay, access to hardship funds and advice on how to use less energy.

Age Scotland’s Policy Director, Adam Stachura, said: “This latest increase to the energy price cap is yet another blow for older people facing the coldest months without the safety net of the Winter Fuel Payment.

“At a time when many are already feeling under pressure, news that bills are set to rise further still will put those already struggling in an extremely difficult position. They will be very disappointed that there is no end in sight, and no support measures identified for those not claiming or not eligible for Pension Credit.

“Pensioners in Scotland are the most starkly affected by fuel poverty, so government must deliver much more to support them or the numbers in this grim position will spiral further. This another compelling reason for the Scottish Government to bring back the universal entitlement to the Winter Age Pension Heating Payment next winter.

“With Scotland already recording the coldest temperatures in the UK, we are seriously concerned about older people’s health being jeopardised if they are unable to heat their homes.”

Consumer Scotland Head of Energy Kate Morrison said: “Although lower than at the peak of the energy crisis, energy bills are still historically high and will rise further in January.

“One of the legacies of the past two years of high bills has been a growth of energy debt and arrears in the GB domestic market which now exceeds £3.6bn – a record high – and bill increases will impact further on levels of debt

“This will be a challenging winter for consumers, particularly those with higher energy needs including disabled people and those with health conditions.

“There is a need for governments to design and deliver better targeted energy affordability support for consumers, particularly given current levels of debt and ongoing pressure on household budgets.”

More energy misery as Ofgem announces 10% price cap hike


23 August 2024 – OFGEM STATEMENT

Every 3 months we review and set a level for how much an energy supplier can charge for each unit of energy and daily standing charge, under the price cap. 

From 1 October to 31 December the price for energy for a typical household who use electricity and gas and pay by Direct Debit will go up to £149 per year. This is an increase of 10% and adds around £12 per month to an average bill.

The new cap is 6% (£117) cheaper compared to the same period last year (£1,834).

You are covered by the energy price cap if you pay for your electricity and gas by either: 

  • standard credit (payment made when you get your electricity and gas bill) 
  • Direct Debit
  • prepayment meter
  • Economy 7 (E7) meter

The actual amount you pay will depend on how much energy your household uses, where you live and the type of meter you have.  

Energy price cap rates 1 October to 31 December

Electricity rates

If you are on a standard variable tariff (default tariff) and pay for your electricity by Direct Debit, you will pay on average 24.50 pence per kilowatt hour (kWh). The daily standing charge is 60.99 pence per day. This is based on the average across England, Scotland and Wales and includes VAT.

Gas rates

If you are on a standard variable tariff (default tariff) and pay for your gas by Direct Debit, you will pay on average 6.24 pence per kilowatt hour (kWh). The daily standard charge is 31.66 pence per day. This is based on the average across England, Scotland and Wales and includes VAT.

Costs included in the energy price cap

The level of the energy price cap is made up of different costs, for example the wholesale cost of gas and electricity, costs to supply energy on the network and VAT. These costs are split within the energy price cap between the unit rate and the standing charge.

Read about typical household energy use and how the energy price cap is calculated on our Average gas and electricity use explained page. 

View and compare 1 October to 31 December and 1 July to 30 September energy price cap standing charges and unit rates by region. 

You can also get and compare all the energy price cap (default tariff) levels. 

Review of standing charges

Last year we started a review of standing charges. Our call for input had feedback from more than 30,000 customers, consumer groups, charities and others.

Today we have published an options paper on our ways to reduce standing charges for households, called ‘domestic standing charges’. Standing charges are set by your energy supplier and are also included in the energy price cap. Your supplier will charge you this cost each day, even if you do not use any energy on that day. The charge covers the cost to maintain the energy supply network, take meter readings, and support government social and environmental schemes, like the Warm Home Discount scheme. 

View Understand your electricity and gas bill

The options in the paper could reduce the standing charge by between £20 and £100 per year by transferring parts of these fixed supplier costs to the unit rate (the price paid for every unit of energy used). 

We know that if these changes are made it could affect people who cannot safely reduce the amount of energy they use. This could be because of their dependence on life-saving medical equipment or living in a low standard of housing with poor insulation.

We are asking energy suppliers to offer energy tariffs that have no or low standing charges as well as their current tariffs. This will mean that energy efficient households will be able to choose a tariff that rewards them for using less energy. It will also mean that other energy customers can also choose from more tariffs that meet their needs.

You could pay less for your energy by changing your energy tariff. Find out if you can change your tariff and how to switch energy supplier.  

The options paper also sets out long-term considerations relating to the assignment of network costs, as a part of a broader review of how electricity and gas system costs are recovered from users.  

We would like to hear your views on standing charges. The discussion closes on 20 September 2024. Read our standing charges options paper and feedback your views using our online form.

Support for people with a prepayment meter

We have also extended our initial 12-month allowance to cover increased debt costs associated with additional support credit which we expect to be in place for at least another 6 months.   Additional support credit is often issued to people at risk of being cut off from their energy supply because they cannot afford to top up their meter. This decision means that the most vulnerable consumers will continue to be supported and have an energy supply this winter.

Next energy price cap review

We review and set a level on how much an energy supplier can charge for each unit of energy including the standing charge every 3 months. The levels for the period 1 January to 31 March 2025 will be published by 25 November 2024. 

Caroline Abrahams, Charity Director at Age UK said: “Means-testing Winter Fuel Payment (WFP)  when fuel prices are rising by 10% spells disaster for pensioners on low and modest incomes or living in vulnerable circumstances due to ill health.

“It means an estimated 2 million older people in all, will face an even steeper mountain to climb in paying their energy bills and staying warm and well when the weather chills. With pensioners also losing the cost-of-living payments they’ve received over the last two years we simply cannot see how some of them will cope.

“This latest bad news about the Energy Price Cap rising quite significantly makes it even more obvious that means testing WFP with virtually no notice & with no protections to safeguard vulnerable groups was the wrong policy choice and one that is potentially hazardous for some older people.”

“There’s scarcely any time to tackle the long-term under-claiming of Pension Credit – for more than a decade a third of pensioners who are entitled to it have consistently missed out. And the million or so older people whose small incomes take them just above the line to claim are horribly exposed – no take-up campaign can help them.” 

“Means-testing WFP in these circumstances this winter is reckless and wrong. The Government must think again.”

Age UK urges any older person living on a low income or struggling with their bills to contact Age UK’s free Advice line on 0800 169 65 65 without delay to check they’re receiving all the financial support available to them.

Alternatively, people can visit www.ageuk.org.uk/money or contact their local Age UK for further information and advice.

National Energy Action has responded: Just now, @Ofgem announced that #EnergyBills will rise 9% from October. NEA Chief Executive @adam_scorer says, ‘There is still time for @Ofgem and UK government to act for those at greatest risk, but without support.’

Ofgem: Welcome fall in the price cap but high debt levels remain

Energy regulator Ofgem has today (Friday 23 February, 2024) announced a significant reduction of the energy price cap for the second quarter of 2024. 

The price cap, which sets a maximum rate per unit that can be charged to customers for their energy use, will fall by 12.3% on the previous quarter from 1 April to 30 June 2024. For an average household paying by direct debit for dual fuel this equates to £1,690, a drop of £238 over the course of a year – saving around £20 a month.  

This will see energy prices reach their lowest level since Russia’s invasion of the Ukraine in February 2022 caused a further spike in an already turbulent wholesale energy market, driving up costs for suppliers and ultimately customers. 

However, despite reaching this welcome milestone, Ofgem recognises that the cost of living remains high and many customers continue to struggle with their bills as standing charges rise and energy debt reaches a record figure of £3.1 billion. 

Therefore, today Ofgem is also announcing: 

  • Confirmation of the levelisation of standing charges to remove the ‘PPM premium’ previously incurred by prepayment customers.  
  • A decision to allow a temporary adjustment to the price cap to address supplier costs related to increased levels of bad debt. 
  • A decision to extend the ban on acquisition-only tariffs (BAT) for up to another 12 months. 
  • Confirmation of the end of the Market Stabilisation Charge (MSC) from April 1. 
  • A decision not to change wholesale cost allowances following a review conducted in late 2023. 

Jonathan Brearley, CEO of Ofgem, said: “This is good news to see the price cap drop to its lowest level in more than two years – and to see energy bills for the average household drop by £690 since the peak of the crisis – but there are still big issues that we must tackle head-on to ensure we build a system that’s more resilient for the long term and fairer to customers. 

“That’s why we are levelising standing charges to end the inequity of people with prepayment meters, many of whom are vulnerable and struggling, being charged more up-front for their energy than other customers.  

“We also need to address the risk posed by stubbornly high levels of debt in the system, so we must introduce a temporary payment to help prevent an unsustainable situation leading to higher bills in the future. We’llbe stepping back to look at issues surrounding debt and affordability across market for struggling consumers, which we’ll be announcing soon. 

“These steps highlight the limitations of the current system – we can only move costs around – so we welcome news that the Government is opening the conversation on the future of price regulation, seeking views on how standard energy deals can be made more flexible so customers pay less if using electricity when prices are lower. 

“But longer term we need to think about what more can be done for those who simply cannot afford to pay their energy bills even as prices fall. As we return to something closer to normality we have an opportunity to reset and reframe the energy market to make sure it’s ready to protect customers if prices rise again.” 

Affordability remains the most significant issue, as people continue to struggle with bills over the last two years, which has led to record levels of energy debt. 

 

To address this challenge in the short-term, Ofgem will allow a temporary additional payment of £28 per year (equivalent to £2.33 per month) to make sure suppliers have sufficient funds to support customers who are struggling.

This will be added to the bills of customers who pay by direct debit or standard credit and is partly offset by the termination of an allowance worth £11 per year that covered debt costs related to the Covid pandemic.  

Prepayment meter (PPM) customers will not be impacted by the extra charge, reflecting the fact that many do not build up the same level of debt as credit customers because they top up as they go. 

Ofgem also confirmed plans to maintain the equalisation of standing charges across payment methods so that customers are not charged more depending on the payment method they use.

Since October 2022 the so-called ‘PPM premium’ was removed by government support via the Energy Price Guarantee. However, with that support coming to an end on April 1, Ofgem has taken steps to provide a lasting solution, which must be funded by bill payers rather than tax payers, to maintain fairness in the system. 

This means PPM customers will save around £49 per year while direct debit customers will pay £10 per year more. 

Increasing network costs has also contributed to the rise in standing charges – and in anticipation of this we published a call for input in November 2023 and are currently reviewing more than 40,000 responses. 

Today Ofgem is also publishing a decision to extend the ban on acquisition-only tariffs (BAT) for another 12 months, but intends to open a consultation to consider shortening this extension to just six months. 

The BAT was introduced in April 2022 to provide more stability at the height of the energy crisis, removing often risky short-term discounted tariffs intended to attract customers from other suppliers. 

As competition returns to the market, Ofgem is encouraging rising numbers of customers switching with a number of measures, including shortening the time suppliers are given to complete a customer transfer from 15 days to just five. 

Additionally, from 1 April, the Market Stabilisation Charge – introduced in tandem with the BAT – will come to an end, meaning suppliers are no longer required to compensate a new customer’s previous supplier when they switch. 

This influenced the regulator’s decision to temporarily extend the BAT rather than remove both safeguards at the same time, ensuring a phased and responsible return towards normality in the market while preventing a return of the risky behaviours which contributed to the high number of supplier failures during the energy crisis. 

Ofgem is also publishing a decision following its wholesale adjustment review. Following unusually high volatility in wholesale prices between October 2022 and September 2023, the regulator examined whether suppliers experienced differences between wholesale costs and the allowances they were allowed to recover via the price cap. 

However, after careful consideration the regulator has concluded to take no further action as wholesale costs did not systematically differ from allowances. 

Citizens Advice Scotland has responded to today’s announcement by Ofgem, setting the energy price cap at £1,690.

The charity is stressing that even though prices are coming down they are still way too high for many households.

CAS Social Justice spokesperson Matthew Lee said: “Today’s announcement has to be seen in the context of peoples’ incomes and how badly households have been battered by the cost-of-living crisis of the past 18 months.

“Even if prices are coming down they are still way too high for many people to be able to afford, particularly the many who have had to go into debt to cover their energy costs since the price surge in 2022.

“It’s important that we don’t become complacent about the lower cap. The fact is that too many people are still struggling to pay these bills, and more targeted financial support like a social tariff is needed for the most vulnerable households.”

Previous CAS research on energy affordability has found that: 

  • Nearly 3 million people report switching the heating off when it’s cold, wrapping themselves in blankets and extra layers instead.
  • 1.4 million people regularly sit in the dark, with no TV or laptop/tablet on, to save on energy bills.
  • Nearly 3 million people in Scotland have cut back on food as a result of rising energy bills.
  • Tens of thousands of people in Scotland have been forced onto pay as you go energy meters against their will.
  • Over 300,000 people say they are concerned about energy debt.
  • In December the average energy debt for people seeking complex debt advice was £2,307 – up nearly £500 compared to the same time last year.
  • 185,000 people say they have changed their bathing habits to save on hot water – they’re sharing bathwater or showering at work or at the gym.

Charities, community projects and customers benefit from £72 million thanks to Ofgem enforcement action

Millions of pounds recovered from firms by Ofgem have been used to help communities across the country in 2023. 

Ofgem steps in when energy companies breach their licence conditions or are found to be failing customers. 

In 2023, the regulator recovered a total of £77.2 million in fines, customer refunds, compensation and alternative action payments – up by £50.5 million compared to 2022’s total of £27.3 million. This includes £5 million worth of fines. 

Examples of breaches include three electricity generators that unfairly raised consumer bills, poor customer service including unacceptable call waiting times and failure to automatically provide compensation for delays in final billing when switching. 

As well as fines and alternative action payments, Ofgem also made energy firms pay £13 million to customers in 2023 – over a million pounds a month – for poor service. 

The vast majority of money recovered from energy companies this year – set to reach over £57 million – was paid into Ofgem’s Energy Redress Fund, which benefits charities and community projects that help vulnerable customers with energy-related support.  

Cathryn Scott, Director for Enforcement and Emerging Issues at Ofgem, said:  “Protecting customers and ensuring that they are treated fairly is at the heart of Ofgem’s mission. 

“That’s why we make suppliers pay when they break the rules or fall short of the high standards we set – and when they do, it’s only right that customers should be the ones who benefit. 

“Every year, the Energy Redress Fund makes a positive difference to the lives of customers across Great Britain, particularly people who are struggling and vulnerable, so to see the fund pass the £100 million mark is a significant milestone. 

“This could not have happened without the thorough investigative work of our compliance and enforcement teams to identify licence breaches or poor behaviour by energy companies, or the Energy Saving Trust who ensure the money is targeted to reach those in need.” 

Since it was set up in 2018, the fund, managed by the Energy Saving Trust, has received more than £137 million and handed out £102 million in grants to 538 projects across England, Wales and Scotland. A further £35 million in funding will be available to be distributed to new and existing projects, and a new round of grant applications is due to open in the new year. 

The nature of support provided varies widely but includes:  

  • £20 million in fuel vouchers issued to charities to identify and provide help to vulnerable customers at risk of disconnection from their energy supply 
  • providing energy advice to more than 500,000 households and installing energy saving methods for more than 150,000 homes to help reduce bills 
  • working to ensure that future home heating controls and new energy technologies work for everyone including people living with disabilities 

This is in keeping with Ofgem’s mission to protect consumers from unfair costs and to drive up standards throughout the energy industry. The significant rise in fines reflects Ofgem’s proactive work to identify issues via a range of methods. 

Among the 538 projects supported by the energy redress fund is the Warm Hubs centre in the coastal village of Seahouses, Northumberland. 

Redress funding has helped to drive the development of this vital community resource, established by the Community Action Northumberland charity, and a lifeline service last winter at the height of the energy crisis. 

Created as a response to tackling fuel poverty, Warm Hubs offer a safe, warm and friendly environment where people can get information, advice, access to services as well as refreshments and the company of other people.  

Energy saving advice and guidance on home insulation is also provided by onsite Community Energy Agents to help people take positive action in their own homes to cut bills.  

These Warm Hubs became an integral part of communities across Northumberland during Storm Arwen in November 2021, when widespread damage to the network left 4,000 homes without power for more than a week.  

With emergency generators set up at the Warm Hubs, people had a place where they could come for a hot meal and a warm shower. 

Christine Nicholls of Community Action Northumberland (CAN) said:  “Without the support of Redress and Vulnerability and Carbon Monoxide Allowance (VCMA) funding we would not have been able to support the huge number of rural households through the recent energy crisis.

“We are very proud of our Warm Hub scheme.” 

Laura McGadie, Head of Energy at Energy Saving Trust, said: “We are pleased to have managed the distribution of more than £100 million in much-needed funds from the Redress scheme to frontline charities and social enterprises since 2018. 

“The projects funded by the scheme are helping customers in the most vulnerable situations through the cost of living crisis, but they also look to the future. 

“Charities and social enterprises have a crucial role to play in ensuring no one is left behind as we transition to net zero and that we all have a voice and a role in the changes that are coming to our energy system.”  

Energy price cap rise will “hammer households even harder” in 2024

  • The energy price cap has increased to £1,928 raising the average bill by £94
  • Union body says UK is “feeding foreign firms’ profits” while British households struggle 

Commenting on Monday’s energy price cap announcement, TUC General Secretary Paul Nowak said: “No one should struggle to get by in one of the richest countries in the world. 

“But 13 years of wage stagnation and cuts to social security have left millions badly exposed to sky-high bills this winter. 

“Energy bills are already 50% higher than two years ago, so today’s rise will just hammer households even harder in the coming year. “ 

“It doesn’t have to be this way.  

“Other governments are investing in publicly owned clean power and insulating homes.” 

“The UK is feeding foreign firms’ profits and subsidising cheaper bills abroad, while British households struggle to heat their homes and pay their bills.” 

Ofgem: Increased wholesale energy costs lead to rise in price cap

Energy regulator Ofgem has today (Thursday 23 November, 2023) announced the energy price cap for the first quarter of 2024.  

The price cap will increase by 5% on the previous quarter from 1 January to 31 March 2024. For an average household paying by direct debit for dual fuel this equates to £1,928, a rise of £94 over the course of a year – around £7.83 a month. The price cap, updated every quarter, sets a maximum that can be charged to customers for energy bills. 

Ofgem’s priority is to protect consumers and ensure that they pay a fair price for their energy. Today’s price increase is driven almost entirely by rising costs in the international wholesale energy market due to market instability and global events, particularly the conflict in Ukraine. 

The regulator will continue to use all levers available to ensure costs are spread fairly and   customers struggling with bills are supported. It has today further developed plans to permanently remove the so-called ‘prepayment meter premium’ to ensure that prepayment customers are charged the same standing charge as direct debit customers. Ofgem has already launched a ‘Call for Input’ on standing charges running until 19 January, 2024. 

Jonathan Brearley, CEO of Ofgem, said: “This is a difficult time for many people, and any increase in bills will be worrying. But this rise – around the levels we saw in August – is a result of the wholesale cost of gas and electricity rising, which needs to be reflected in the price that we all pay. 

“It is important that customers are supported and we have made clear to suppliers that we expect them to identify and offer help to those who are struggling with bills. 

“We are also seeing the return of choice to the market, which is a positive sign and customers could benefit from shopping around with a range of tariffs now available offering the security of a fixed rate or a more flexible deal that tracks below the price cap.  

“People should weigh up all the information, seek independent advice from trusted sources and consider what is most important for them whether that’s the lowest price or the security of a fixed deal.” 

Ofgem recently set out new rules for suppliers making clear that they should be prioritising enquiries from vulnerable customers who need help and proactively reaching out to households if they miss two monthly or one quarterly payment, check to see if they are struggling with bills and, if so, offer support such as affordable payment plans or, if appropriate, repayment holidays. 

The regulator has also taken robust action to raise standards of customer service and worked in conjunction with suppliers and consumer groups to encourage industry to support those struggling with their bills, including the Winter 2023 Voluntary Debt Commitment recently announced by Energy UK and Citizens Advice. 

A Statutory Consultation on levelling standing charges for prepayment meter and direct debit customers so customers pay the same daily charge has been published today.  

Previously, customers on prepayment have been charged more than those who pay by direct debit to cover the additional costs and resources required by suppliers to provide their services. 

In October 2022, the government introduced measures to temporarily remove this ‘PPM premium’ via the Energy Price Guarantee, which remains in place until April 2024. 

Following a consultation this summer, Ofgem is now proposing an enduring solution that would ‘levelise’ these standing charges to coincide with the end of that government support. This consultation also sets out proposals to share the costs of bad debt more equally across customers to reduce the premium paid by standard credit customers (those who pay on receipt of a monthly or quarterly bill for the exact amount of energy used). 

Under the terms of the regulator’s proposal, this would save PPM customers around £50 a year, reduce Standard Credit bills by around £45 a year but add around £20 a year for direct debit customers. Ofgem is keen to hear views on this proposal from all interested parties.    

This follows the launch of a wider conversation on the issue of standing charges last week and how they should be set, which has already attracted a high number of responses in the first week of the consultation. 

In response to today’s Ofgem energy price cap announcement, Joanna Elson CBE, Chief Executive of Independent Age said: ““Today’s energy price cap announcement offers little reassurance for older people in financial hardship, with bills still 85% higher than before the energy crisis.  

“We speak to people in later life who are living in one room because they can’t afford to properly heat their home, those who risk falls because they aren’t turning on the lights, and older people who are in thousands of pounds of debt to energy suppliers. They urgently need help.  

“With average energy prices having close to doubled in recent years, coupled with rocketing household costs such as water, food and broadband, those on a low income have endured several years of sky-high costs from all angles. Older people in financial hardship are especially vulnerable to sharp price increases, as many are on a fixed income. The extra money simply isn’t there. 
 
“The UK Government needs to announce financial support now to help the most financially vulnerable, including those in later life, get through this winter. After that, we need a long-term solution to protect against the impact of continuing high prices, including energy.

“Our evidence shows an energy social tariff would offer more stability to older people on a low income and make sure no one is forced to make dangerous choices. This must be something the UK Government consults on.” 

The next quarterly price cap announcement will be announced in February 2024, covering April – June 2024.