Five million households covered by energy regulator Ofgem’s ‘safeguard tariff’ will likely see prices rise from 1 October.
The safeguard tariff, which was introduced in April 2017, caps the amount energy suppliers can charge customers on prepayment meters and those in receipt of the government’s warm home discount.
However, the level of the tariff will rise by £47 a year for dual fuel customers, taking annual prices to £1,136. It’s likely energy suppliers will up their prices in line with the new rate.
Rik Smith, energy expert at comparison website uSwitch, comments: “Since the prepayment cap has been introduced, we have seen all the major suppliers put prices up to its maximum level. With this new higher cap, it’s likely they’ll do the same, handing an average £47 price rise to some of the most vulnerable energy customers.”
Ofgem can update the level of the tariff twice a year, and February’s adjustment saw prices rise by £57. It blames rising wholesale prices on the move.
However, Dermot Nolan, chief executive of Ofgem, stresses that vulnerable customers are still better off despite the price rise. He says: “Around five million households, including some of the most vulnerable, remain better off and are no longer overcharged for their energy, thanks to the safeguard tariff.
“Any price rise for customers is unfortunate. But while the level of the tariff will rise in October, these customers can be confident that this increase is justified and that their energy bill reflects the real cost of supplying gas and electricity.”
Check if you can switch and save
Customers can still get a better deal by checking if they can switch and save. Mr Nolan explains: “There are better deals on the market for those who want to save even more money by switching.”
Mr Smith adds: “The only way prepayment customers can truly protect themselves is to switch to a cheaper deal or fix their tariff for additional security. Even if a prepayment customer is in debt to their supplier, they can still switch - as long as the debt is under £500 per fuel and the new provider agrees to take on the debt.
“The cheapest prepayment tariff is currently £159 lower than what the new cap will cost from October, but this is still one of the most expensive ways a household can pay for their energy. If possible, switching to a credit meter and taking advantage of some of the cheapest deals or longer fixes on the market is a much cheaper way to pay for a household’s energy.”
Ofgem is currently working to introduce a price cap for the remaining estimated 11 million households on poor-value default standard variable tariffs (SVTs). This is due to take effect by the end of the year following a consultation later this month.