By Nicholas Earl
Ofgem has opted against shifting the costs of supplier failures to unit rates, and has instead kept them on standing charges.
This follows a month-long review of handling the costs from carnage across the energy sector, with the watchdog ultimately deciding that more energy users would pay less through standing charges.
It concluded that while some low consuming users – some of whom may be vulnerable – might benefit from changes, there remain a number of higher consuming users including vulnerable users that would pay more.
The regulator took the view that retaining the current methodology would protect users with greater energy needs, such as disabled users and users with electric heating in areas off the gas grid.
Unit rates would impose costs dependent on energy use, while standing charges refer to costs imposed on consumers regardless of how much they consume.
An Ofgem spokesperson said: “Following a review of one part of electricity standing charges covering the cost of supplier failures, we looked long and hard at whether moving the costs from standing charges to usage was the right thing to do, but the numbers just didn’t stack up.
Our analysis shows it would disproportionately negatively affect some of the most vulnerable consumers who use high amounts of energy and are least able to reduce their use, such as those with disabilities and the elderly, while resulting in minimal savings for those it would benefit – around just £1 a month.”
It said it would continue to keep standing charges under review and consult widely on any possible future changes.
Customers bear the cost of market carnage
Over the past 12 months, nearly 30 suppliers have collapsed – hammered by the lethal combination of soaring wholesale costs, the constraints of the price cap and poor management.
This has resulted in over two million customers being ferried from fallen firms to surviving suppliers – at an estimated cost of £2.7bn.
Meanwhile, the cost of placing Bulb Energy into public hands following its collapse over winter has also cost energy users at least £3bn.
These clean-up bills will put further pressure on Brits bracing for record energy bills this winter.
Multiple forecasters have predicted the energy price cap will rise to at least £3,500 per year in October, and climb above £4,000 next year in the depths of winter when demand is at its peak.
The cap is currently set at £1,971 per year, which is already a record high.
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