Ofgem price cap is no silver bullet for energy bills, warn experts
The power market regulator, Ofgem, has proposed a cap on power payments that it says will save UK households £1bn per yr – however consultants have warned that customers are nonetheless susceptible to being overcharged for fuel and electrical energy.
The watchdog desires to place an higher restrict of £1,136 on typical twin gasoline payments for patrons paying by direct debit, which is able to result in financial savings of £75 per yr on common for these on default offers, whereas a typical shopper on the most costly tariff stands to save lots of over £120.
Ofgem is aiming to place the value cap in place by the tip of this yr, and stated it’s going to shield UK households from being overcharged for power.
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“Shoppers can have faith that falls in power prices shall be handed on to them and if prices improve, Ofgem will be sure that any rise shall be attributable to real will increase in power prices fairly than provider profiteering,” stated Dermot Nolan, chief government of Ofgem.
Nevertheless, some consultants have warned that the proposed cap just isn’t the silver bullet that Ofgem appears to be claiming it’s.
Mart Todd, co-founder of switching website energyhelpline, stated the regulator had made a “sturdy transfer” however added: “For customers, the modifications solely go so far as banning rip-offs. Prospects might nonetheless save an additional £200 to £300 per yr by switching provider. With over 80 suppliers energetic within the UK, prospects have the facility to vote with their ft and get a greater deal.”
In the meantime, Peter Earl, head of power at Evaluate the Market, stated the cap is “solely a sticking plaster”, which fails to handle the “elementary failings” throughout the power market.
“A worth cap of £1,136 will solely shield UK households from the worst excesses of ordinary variable tariffs,” he stated.
“The largest hazard of the value cap is that it’ll lull individuals into pondering that they by no means have to interact with their power supplier once more. Greater than a fifth (22 per cent) of these we requested say that the introduction of a worth cap would end in them being much less prone to swap supplier.
“It is important that the regulator, Ofgem, makes it very clear that the value cap is a short lived answer and that individuals will nonetheless almost definitely solely get one of the best offers by buying round for mounted tariffs.”
Mr Earl famous that the cap might doubtlessly push power costs up, a view echoed by Richard Neudegg, head of regulation at uSwitch.
“Households ought to be beneath no phantasm of safety. Costs can nonetheless rise when there’s a cap, as we’ve seen with the 2 will increase to the prepayment cap this yr which have added £104 to power payments for prepayment prospects,” he stated.
“The best means to save cash in your power invoice – in addition to ship a transparent sign to the power corporations to up their recreation – is by switching provider.”
The response throughout the power market was way more constructive: shares in British Fuel proprietor Centrica, the UK’s largest power provider, rose as a lot as 6 per cent, whereas EDF was up greater than three per cent.
Russ Mould, funding director at AJ Bell, stated power shares rallied as a result of corporations now have readability on the regulator’s plans, and since the proposed cap falls in the course of the anticipated vary of £1,100 to £1,160.
“Ofgem has subsequently proven its enamel however maybe not bitten fairly as exhausting because it might have. Its report now implies that the utilities – and traders – know precisely the place they stand,” Mr Mould stated.
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