British Regulator Supports Govt on Bills

British energy regulator Ofgem will work with government to ensure that all households on standard variable tariffs (SVT) and other default energy tariffs receive price protection as soon as possible if legislation is in place, it said on October 11.

It also said that it was extending its prepayment safeguard, saving those customers who typically pay the most per unit of energy an average of £120 ($158)/year. Ofgem, which does not regulate Northern Ireland, said also that it would work on extending price protection to at least 2mn more households for winter next year, once the timing of the government’s price cap is confirmed.

The government is expected to announce broader price caps for energy consumers on October 12. Prime minister and Conservative Party leader Theresa May said on October 5 in her speech to the annual party conference that customers on SVT would be protected. However, it is generally recognised that the SVT exists to allow energy companies to offer low prices so as to woo new customers.

The idea of capping bills was first mooted by Ed Miliband when he led the Labour Party in opposition and it was described as economically illiterate, as the market was considered to be the best way to keep prices down. An enquiry by the Competition and Markets Authority found no evidence of cartel behaviour between the major six utilities in its investigation, which concluded last year.

“The government’s plan to provide price protection to all households on default deals will reassure them that the price they pay reflects the underlying costs of supplying their energy,” Ofgem said, reminding readers that “people will be able to save even more money by switching to a better deal.”

So far these savings have not been seen as sufficiently large to encourage many customers to continue switching supplier once special offers expire and the SVT kicks in a few months later.

Ofgem will consult on the design of the safeguard tariff for default deals while the government’s draft bill progresses through parliament, it said. In the meantime, suppliers must step up efforts to get more of their customers on default tariffs on to better value deals: “Some suppliers have recently come forward with proposals to do so but more action is required,” it said. 

To help with this, Ofgem is introducing new rules to allow suppliers to roll those customers coming to the end of their contracts on to another fixed deal, instead of a poor value standard variable tariff.  

The UK’s largest household energy supplier Centrica had not told NGW at time of press what its alternative proposal to SVT caps was, but did state that it has been consulting with the regulator.

Ofgem CEO Dermot Nolan said: “Ofgem shares the government’s concern that the energy market is not working for all consumers and is determined to reduce the detriment suffered by those overpaying for their energy, particularly those who are vulnerable.”

William Powell