More than 5 million homes in the UK are set to see their energy bills rise as regulators look to increase a price cap that was introduced to protect vulnerable and pre-payment customers.
Ofgem have said it will be raiding its safeguard tariff by £57 a year from 1st April, from £1,031 to £1,089 a year, as a result of higher gas and electricity costs.
The decision to increase energy prices comes after the regulator extended its safeguard tariff to approximately 1 million vulnerable consumers on 2nd February, which means a total of 5 million customers are protected by the energy tariff, which was introduced in April 2017.
However, Ofgem said that those on the tariff would continue to be better off, despite the pay rise and would continue to be £35 lower than current standard variable tariffs paid by direct debit customers.
Dermot Nolan, chief executive of Ofgem, said: “Protecting vulnerable customers is a priority for Ofgem.”
He added: “Even when energy costs rise, people on the worst deals are better off under the safeguard tariff as they can be sure that they are not overpaying for their energy and any rise is justified.”
Every six month Ofgem update their safeguard tariff and adjust the prices according to the cost of supplying energy, including wholesale prices and governmental policy costs, such as green subsidies.
A report by Dieter Helm found that UK households are paying significantly more for green subsidies than initially forecast and that investment into reducing carbon emissions could have been achieved at a much lower cost.
Stephen Murray, energy expert at MoneySuperMarket, said: “What’s the point of putting a price cap in place for vulnerable customers if you’re going to potentially raise prices twice a year anyway?
“Ofgem saying customers are ‘better off’ will create the increased apathy that the cap is likely to drive, and stop those most in need of saving hundreds of pounds more.
“This really is further evidence, if it was needed, that price caps, whether for vulnerable customers or the 15 million households stuck on expensive standard variable tariffs, just don’t work.”