Renewable energy companies which have previously raised concerns about a potential price cap “loophole” have responded positively to the news that three price cap derogations have been issued by Ofgem.
The derogations are for standard variable tariffs (SVTs) offered by Good Energy, Ecotricity and Green Energy UK, where consumers have chosen a tariff that contributes to renewable generation.
Octopus Energy chief executive Greg Jackson warned ministers last year that exempting green tariffs from the price cap opens up a potential green tariff “loophole”
Presenting evidence to the House of Commons during the committee stage of the price cap bill he suggested that companies could use the low carbon exemption to continue overcharging customers.
Ofgem has said energy suppliers will have to comply with the price cap unless the regulator gives them express consent, such as the derogations issued last week.
An Ofgem spokesperson said: “We don’t see this as a loophole.”
They added: “To receive a derogation, a supplier would need to demonstrate to us that the tariff does contribute to renewable generation (beyond existing subsidies) and it did materially cost more to offer it.”
In the wake of the latest derogations, Octopus said they “look sensible”.
Clem Cowton, director of external affairs at Octopus Energy, told Utility Week: “Ofgem took on concerns about the potential for loopholes where ‘brown’ companies might carve out green tariffs, and these derogations look sensible.
“Companies like Good Energy with 100 per cent renewably generated electricity across all tariffs, managed within their own supply chain, are clearly not trying to dodge the price cap.”
Hayden Wood, co-founder of Bulb, has also previously raised concerns about exempting renewable suppliers from the cap.
Responding to the news of the derogations, he said: “We’ve always been big supporters of the price cap. Ofgem did a really good job at implementing it quickly.
“We understand why the derogation was necessary, but we hope in future that all renewable suppliers will be able to provide energy that is both renewable and affordable.
“At Bulb, we supply 100 per cent renewable electricity at prices £120 below the price cap.
“It’s still possible to make big savings by switching supplier. We’d like to see as many people as possible making the switch.”
The derogations issued to suppliers came into effect on 1 January and will remain, unless otherwise revoked or amended by Ofgem, until 31 March this year.
At that point the companies will need to submit further evidence to the regulator to achieve permanent derogation.
Pure Planet meanwhile was granted temporary directions for “alternative compliance assessment for the default tariff price cap”.
This will remain in effect until 31 December this year, unless otherwise revoked or amended by Ofgem.
The price cap came into force on 1 January 2019. Ofgem set the level of the cap at £1,137 on 6 November 2018, just £1 higher than the proposed level it announced in September last year.