The vitality worth cap may very well be lifted for a set interval to assist suppliers get better a file £3bn of unhealthy debt accrued by means of unpaid payments, the trade regulator has introduced.
Ofgem mentioned on Friday it was consulting on proposals for a one-off cap adjustment of £16 – equal to round £1.33 a month – to be paid between April 2024 and March 2025.
Those on pre-payment meters wouldn’t be affected by the plan, the watchdog mentioned.
“The scale of this debt means that it is crucial that suppliers have sufficient funding to ensure they can meet the strict regulations Ofgem has in place around how they treat customers facing payment difficulties.
“This adjustment to the worth cap will guarantee suppliers have the assets to assist prospects combating debt.”
Ofgem is anxious to keep away from a repeat of extreme monetary strain on many suppliers after dozens, together with Bulb, collapsed amid a spike in wholesale vitality prices in 2021.
That disaster added about £82 to each single buyer’s invoice on the time.
The worth cap, which has come down for the reason that unprecedented payments witnessed final winter, not solely displays market costs but additionally accommodates different mechanisms to permit corporations to get better restricted prices.
Tim Jarvis, Ofgem’s director for markets, mentioned: “We know that price of residing strain is hitting individuals arduous and that is evident within the enhance in vitality debt reaching file ranges.
“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 file degree of debt within the system means we should take motion to verify suppliers can get better their affordable prices, so the market stays resilient, and suppliers are providing customers assist in managing their money owed.
“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.
“The worth cap has helped to guard customers from a unstable gasoline market. However, it stays a blunt instrument in a altering vitality sector, and the way in which it really works may have to vary sooner or later, so prospects proceed to be protected.”
Ofgem mentioned motion to assist these struggling to pay their payments this winter, which got here into pressure on Thursday, included guidelines on the provide of debt compensation plans and holidays.
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Source: information.sky.com”