Safeguard Tariff Extended by Ofgem to 5m Homes at a Higher Price

Today, the energy regulator announced that it would extend a cap on energy bills of vulnerable customers to 1m more households. However, higher wholesale energy costs have prompted the agency to push the cap higher.

The cap of Ofgem or the so-called safeguard tariff stops the suppliers from charging customers too much. It has already been extended to a total of 5m homes after its introduction in 2017.

The said cap was set at £1,031. However, from April it will be raised to £1,087, meaning that millions of savings of households will drop from £115 per year on average to £66.

The chief executive of Energy UK, Lawrence Slade, stated: “It is right that there is support for the most vulnerable who may be less able to benefit from what is a highly competitive market.

“That the cap will rise from April does show how energy costs, which are out of any suppliers direct control, are increasing and underlines why it is critical any broader cap must be cost-reflective and protect competition which is delivering benefits for consumers.”

Claire Perry, the energy and clean growth minister, said that the move was a “positive step.” However, she said that the tariffs on energy are still too high.

Dermot Nolan, the chief executive of Ofgem, apologised last month to vulnerable customers for the agency’s failure to cap their bills earlier. He said that protecting those customers was considered as a priority of Ofgem.

Nolan stated: “Ofgem is working with the government to protect all customers on poor value default deals, such as standard variable tariffs, from being charged too much for their energy as soon as possible. Our aim is to protect those who do not switch while making it easier for those who do to get a better deal.”

Various consumer groups were generally dissatisfied by the increase in the price cap level, even though they welcomed the said move to extend it.

The founder of MoneySavingExpert, Martin Lewis, said that it “leaves the whole thing feeling somewhat flaccid” while the energy expert at MoneySuperMarket, Stephen Murray, said that it was additional proof that price caps “just don’t work.”

The UK government expects to implement a price cap on expensive default tariffs by next winter.