London: Ofgem, Britain’s energy regulator, is planning a one-off increase to its price cap on energy bills to reduce the risk of suppliers going bust amid almost 3 billion pounds ($3.8 billion) of customer energy debt, it said on Friday.
Soaring wholesale energy costs following Russia’s invasion of Ukraine led to record high energy prices last year which were capped by government support at an average of 2,500 pounds ($3,191) in January for most households.
Since then the cap has fallen, and will be 1,928 pounds a year on average from January, but prices are still historically high and energy debt has hit its highest ever level due to the prices and wider cost of living pressures, regulator Ofgem said.
“The record level of debt in the system means we must take action to make sure suppliers can recover their reasonable costs, so the market remains resilient, and suppliers are offering consumers support in managing their debts,” Tim Jarvis, Ofgem’s director general for markets said.
Ofgem said it would seek to add a one-off adjustment of 16 pounds per customer, equivalent to around 1.33 pound a month, to be paid between April 2024 and March 2025.
Ofgem also proposed that any extra costs would not be passed onto customers who use prepayment meters for their energy, typically less affluent people.
“The proposals set out today are not something we take lightly. This approach will ensure the costs are recovered fairly, without penalising a particular group of customers,” Jarvis said.