Some of the most vulnerable customers including those on Ofgem’s safeguard tariff may experience price increases as companies align their unit prices with the incoming price cap.
Suppliers have been writing to their customers this week ahead of the implementation of the cap next month.
Both Npower and SSE have confirmed some customers may see their prices rise.
SSE made the announcement in its latest financial report published on Tuesday (27 November).
It said: “Due to the way the cap is calculated there will be a comparatively small number of customers that will see an increase in their overall energy costs.
“Customers currently on the Energy Assist Tariff, customers with very low usage or unusual metering types are the most likely to be affected.
“SSE has worked hard to keep the number of customers affected by this to a minimum and keep any potential increases as small as possible.”
Similarly Npower has confirmed that prices will increase for some of its customers also.
An Npower spokesperson told Utility Week: “Unfortunately as a result of Npower aligning its unit price and standing charge with Ofgem’s price cap, some customers – such as people with complex meters, on the safeguard tariff or those with very low usage – may see an increase in their current prices (although their charges will not exceed the cap level).”
An Ofgem spokesperson explained: “A small number of suppliers currently have default tariffs that are very competitively priced, sometimes even below the level of our cap. These suppliers could choose to increase these tariffs to the level of the cap.
“This is more likely to happen to single fuel electricity customers. This is because suppliers have historically subsidised electricity use by charging above cost for gas used. This is due to commercial pricing strategy decisions by the suppliers.
“We will set a cap on the price of electricity and gas independently, and not on the combined cost of these fuels – so any effect of cross subsidy above the level of the cap for either will be removed. As such, it is likely that for customers to get their electricity and gas from different suppliers that increases in one would be offset by decreases in the other.”
Ofgem set the final level of the incoming energy price cap at £1,137 on 6 November, just £1 higher than the proposed amount.
Labour’s shadow energy minister, Alan Whitehead, warned at a fringe event at the annual party conference in September that the price cap may lead to a “perverse outcome” for some customers.
He said that some of the most hard-up customers could end up paying higher bills as a result of the market-wide cap on standard variable tariffs (SVTs).
He expressed concern at the event, organised by Energy UK, about how the safeguard tariff for vulnerable customers is due to be absorbed into the wider cap on SVTs due to differences in the way they are calculated.