Brearley braces customers for price cap increase

Ofgem chief executive Jonathan Brearley has issued a warning to customers to prepare for likely major increases to the price cap as a result of rising wholesale costs.

The energy regulator will announce what the latest cap level will be, which will come into effect on 1 October, next Friday (6 August).

Writing ahead of the announcement Brearley warned consumers that while nothing has yet been finalised the cap could rise by as much as £150.

He said: “I know that the last 18 months have been tough for many households as a result of the Covid-19 crisis. Rising inflation and the forthcoming end of the furlough scheme on top of the impact that the pandemic has had on people’s livelihoods means that family finances are tight now.

“Unfortunately, against this backdrop I am today alerting customers that global prices for fossil fuels, especially gas, are increasing at an unprecedented rate. Ultimately this will feed into all customer energy bills in the UK.”

Brearley explained that wholesale costs account for around 40 per cent of the price cap and that to be more transparent about the movement of wholesale costs and their impact, Ofgem has launched two new price trend charts on its data portal which will be updated every month.

Following the first lockdown wholesale prices fell and Ofgem subsequently reduced the level of the cap, which came into effect last October, by £84.

However, since the cap was last updated in February wholesale electricity and gas prices have increased by more than 50 per cent.

Brearley referenced the support available from suppliers and said Ofgem was working with industry to introduce more measures for the coming winter.

He added: “This is difficult news for all households. Therefore, my message to energy companies is clear – you need to provide all available help and support to customers who are struggling as a result of this price change.

“Ofgem has put strict rules in place to ensure that energy companies treat customers fairly – we expect them to be adhered to and will take the necessary enforcement action to ensure they do. We are also working collaboratively with the industry on a package of further help for those in difficulty this winter.”

In response a spokesperson for Energy UK said: “As Ofgem has acknowledged, over the last year and a half suppliers have stepped up the support they provide to customers struggling with bills in response to the financial difficulties many households have faced as a result of the pandemic.

“Suppliers committed to additional measures last spring and support such as emergency credit for prepayment customers and help with repayment plans has been provided to millions of customers during that time.

“Suppliers know that there will be a continuing need for such support over the coming months and are committed to providing it.”