HOUSEHOLDS could be left with fewer cheap energy deals under a proposed rule change, experts have warned.
Regulator Ofgem today announced reforms aimed to shake up the energy sector, but they could come at the cost of consumers.
Just days ago, Ofgem ordered suppliers to improve their practices due to concerns they are failing vulnerable customers.
Meanwhile, a raft of energy suppliers have collapsed since the start of last year after being unable to cope with soaring energy prices.
The government is facing a roughly £6.5billion bill for the collapse of supplier Bulb alone.
The regulator said on Friday the fresh proposals include introducing capital requirements to ensure suppliers have enough cash to deal with future energy shocks.
It will also require suppliers to “ringfence” money they need to buy renewable energy and more closely monitor the use of customers’ credit balances to stamp out misuse by firms.
Plus, Ofgem proposed an extension to the temporary so-called market stabilisation charges for suppliers.
Simply put, these kick in when wholesale prices- the price your energy firm buys your energy for – decline.
They mean that when a customer switches their supplier, the new supplier must pay a fee to the old provider to compensate for energy it bought at high wholesale prices.
It’s an aim to spread the risk among suppliers, but it could leave them with less incentive to offer longer-term fixed deals below April’s Energy Price Guarantee (EPG), according to Richard Neudegg, director of regulation at Uswitch.
This applies if wholesale prices continue to fall, meaning more suppliers may be hit with the charges if customers make the switch.
The government’s EPG currently caps the average household bill to £2,500 until April 2023.
After this, energy bills will increase to £3,000 for the following 12 months.
Mr Neudegg said: “It’s sensible to ensure that suppliers have sufficient financial backing to operate in a challenging energy market, but Ofgem must be careful it doesn’t add too many costs that ultimately have to be paid by consumers.
“Ofgem’s proposal to keep a protective ring around suppliers for another year comes at the detriment of potentially fewer fixed deals for customers below the Energy Price Guarantee.
“If wholesale prices fall, consumers may lose out.
“This move raises questions as to whether Ofgem’s stabilisation proposals are in the best interest for consumers, at a time when people are already struggling.”
Ofgem is seeking feedback and hopes to publish the reforms in the spring, meaning they’re not guaranteed to come into effect.
Jonathan Brearley, Ofgem’s chief executive, added: “These proposals will provide protections, checks and balances for consumers, suppliers and the entire sector to create a more stable market.
“We want suppliers to be able to be innovative and dynamic, while also making sure they are financially stable, and that customers’ money is protected.”
Other ways to get help with bills
In the Autumn Statement, Chancellor Jeremy Hunt revealed millions on benefits and Universal Credit will receive an extra one-off £900.
Eight million households currently get cost of living payments worth up to £650.
Chancellor Jeremy Hunt also said pensioners will be getting a £300 one-off payment.
You qualify under the current rules if you normally get the Winter Fuel Payment.
The £300 cost of living payment is paid on top of the other winter support.
You’ll need to be:
- born on or before 25 September 1956
- have lived in the UK for at least one day during the week of 19 to 25 September 2022 in what is known as the “qualifying week”
Plus, struggling families are eligible for the Warm House Discount this winter.
Households in England and Wales don’t need to apply to get the cash and they’ll automatically qualify if they are receiving certain benefits.
You can read more about who’s eligible here.
There are also plenty of energy grants and schemes open to help you out if you’re struggling.
British Gas has confirmed it’ll pay its most vulnerable customers grants worth £750 to help with sky-high bills.
Ask your supplier what’s on offer and how to apply, or check here:
- British Gas Energy Trust
- Bulb energy fund
- EDF’s energy customer support fund
- E.on’s energy fund
- Npower’s energy fund
- Ovo’s debt and energy assistance
- Scottish Power’s hardship fund
Plus, millions of households are currently receiving support through the £400 energy rebate, which has been split into six monthly instalments.
We explain how paying for your bill in a different way might impact how you’re issued the £400 rebate here.
On top of that, you might be able to get help through the Household Support Fund, which is being issued by councils.