UK Regulator Lifts Retail Price Cap by £100/yr (Update)
(Adds comment from GWPF)
UK energy markets regulator Ofgem has lifted the cap on gas and energy prices for six months with effect from April 1 to pre-pandemic levels, it said February 5.
It means retailers can charge householders on a standard dual-fuel direct-debit tariff another £100 ($137)yr and is mainly owing to the rise in wholesale prices, it said, adding that customers can switch supplier before April 1 if they want to save money.
"When wholesale prices fell sharply last year in the wake of the first lockdown, the level of the price cap fell by £84 in October to its lowest level yet for the current winter period, principally as a result of changes in wholesale energy prices. Demand for energy has since recovered which has pushed wholesale prices back up to more normal levels," it said.
Ofgem CEO Jonathan Brearley said that as the UK "still faces challenges around Covid-19, during this exceptional time I expect suppliers to set their prices competitively, treat all customers fairly and ensure that any household in financial distress is given access to the support they need."
The rise will be reviewed at the beginning of next winter, when Cornwall Insight expects further hikes: "April electricity baseload prices have risen 16% from 1 December to present, with prices this period generally trending higher supported by continued cold weather and higher demand levels, despite lockdown restrictions. If wholesale price levels are maintained through the summer, early predictions from Cornwall Insight show that the winter 2021-22 cap could see a further increase of approximately £14, assuming that the £23.69 summer 2021 adjustment allowance is not carried on into next winter," it commented.
Hardship
According to the UK daily paper Guardian in a mid-December report citing research by Citizens Advice, over 2mn customers were then in arrears on their gas and electricity bills, of which 600,000 have fallen behind since February 2020 – the month before the lock-down started.
It is not only customers having difficulties paying their bills: retailers too are going bankrupt. Late in January Simplicity ceased trading, its 53,000 customers being transferred to Centrica as part of Ofgem’s supplier of last resort process. Since January 2020 alone, six retailers have ceased trading; the largest of these was Green Network Energy, whose 360,000 customers were transferred to EDF. The new supplier bids for the right to take over the customers.
Ofgem told NGW that this year it has begun monitoring new and existing suppliers' creditworthiness and carrying out other checks on the sustainability of their businesses in order to avert failures. All suppliers bear the cost of unpaid levies, obligations and bills, unless the new supplier includes these debts as part of its bid, in order to acquire new customers, for example. The government is reviewing energy supplier licence terms.
Bills are expected to rise further as part of the UK's drive to meet its net zero carbon commitments: the cost has been put at about £900bn over the remaining period, or roughly £30bn/yr.