Ofgem is proposing no further adjustments to the price cap to account for the impact of the pandemic, following a review of suppliers’ forecasts for bad debt.
The regulator previously ruled that cap period six, which began on 1 April, should include an additional allowance, or “float”, for suppliers to claim £23 to cover higher levels of bad debt from more customers being unable to pay their energy bills due to the impact of Covid.
It said it would “true up” the float later using final costs.
However in a consultation published today (18 May) Ofgem proposed not to include an additional allowance in cap period seven (beginning on 1 October) for costs arising from Covid-19.
Explaining its rationale, the regulator said forecasts of debt-related costs made by suppliers for both credit and pre-payment meter (PPM) customers are not materially greater than their pre-Covid levels.
At the same time the current evidence shows a positive economic outlook for the cap period, with the economy forecast to grow at a faster rate. Furthermore, unemployment is expected to remain broadly stable and no longer to peak during this period.
“Our evidence on the financial resilience of customers does not contradict the broader economic metrics,” Ofgem said.
It added that it would only consider a float necessary if there is “significant and clear evidence” that suppliers are likely to incur material additional costs due to Covid. This has not been found to be the case therefore it does not consider an adjustment necessary.
The consultation is open until 15 June and a final decision will be published in early August before the next price cap update in October.