The energy regulator has given its view on how rising bad debt costs for suppliers should be factored into the cap on default tariffs.
Ofgem has proposed a £21 increase to the cap when it is next revised, in April 2021. This will be offset by the ending of a temporary £15 increase which reflected the findings of a judicial review into how Ofgem had calculated the first cap period. This means the net increase will be £6.
A consultation on the proposals will run until 21 December, with a decision due at the start of February.
On the subject of pre-payment meter (PPM) customers, Ofgem stressed that at this stage it did not have enough evidence of material cost increases to make any separate adjustment to the cap. However, this will be revisited at the next review of the PPM cap, which was due to finish at the end of this year but has been extended into 2021.
Announcing the consultation, Anna Rossington, deputy director, future consumers & retail price protection, pointed out that Ofgem had reduced the level of the cap at the start of October to reflect the fall in the cost of wholesale energy.
She added: “Ofgem continues to closely monitor costs faced by suppliers so that when they fall, as they did earlier this year, consumers benefit.
“However, it’s equally important that when costs go up, suppliers can recover them from consumers within the price cap mechanism.
“This helps to ensure that suppliers have the finances to continue to supply energy to their customers and fulfil other licence obligations, including protecting their customers, especially those in vulnerable circumstances.”