Ofgem announces greater customer protection
Ofgem has announced plans to limit how much suppliers can keep in credit balances as well as rules to protect credit balances when a supplier fails.
The announcement comes as the average household energy bill is set to increase by an eye-watering £830 to £2,800 in October as a result of the price cap.
The plan is to “ensure credit balances do not become excessive” by limiting payments billed via direct debit. This is important as there have been “troubling signs” that some energy suppliers have further increased household’s direct debits.
The plan also includes rules to protect credit balances if an energy supplier goes bust and a customer is moved to a new supplier.
The announcement explained
Jonathan Brearley, chief executive of Ofgem, said: "Today's plans are another step in making sure the complex energy market is fair, resilient and works for everyone.
"The energy market remains incredibly volatile and there are a number of huge geopolitical issues continuing to apply massive pressure. Ofgem is working hard to ensure energy suppliers shore up their positions so they can weather the ongoing storm.
"By ensuring that suppliers are operating well-financed, sustainable, and have more resilient business models, we can avoid the supplier failures we saw last year which caused huge stress and worry and added costs to everyone's bills.
"But if some do still fail, consumer credit balances and green levy/renewables payments will be protected. Currently they are used by some suppliers like an interest free company credit card.
"Moving forward, all suppliers will have to have enough working capital to run, without putting their customers' credit balances at risk.
"Today's proposals will make sure that customers' hard-earned money is properly protected so that a company must foot the bill if it fails, rather than consumers picking up the tab."
Gillian Cooper, of Citizens Advice, said: "Ofgem has previously allowed energy suppliers to run risky business models. As a result, it's customers who've been left to foot the bill when companies collapse.
"We're glad that Ofgem has listened to our warnings and is taking necessary steps to tackle some of the root causes of these issues.
"It must now ensure suppliers stick to these tougher standards so that people are better protected in the future."
Cost of living
The price for oil and gas have continued to hike over the last few months as a result of post-lockdown demand and the war in Ukraine.
Due to the rising and fluctuating wholesale prices, energy suppliers are forced to buy energy at abnormally high prices and therefore forcing Ofgem to increase the price cap to an all-time high. No one benefits here as not only can it push suppliers out of business, but consumers will have to pay more for their energy.
However it is not just energy but the overall cost of living has been rising, with consumer prices increasing at a rate that is the fastest in 40 years. As a result, necessities such as food and fuel are becoming harder and harder to afford.
However this recent Ofgem announcement is one of the many ways they plan to tackle the energy crisis and the overall cost-of-living crisis.
The plans to limit the credit balance of energy suppliers means that households will now be able to hold onto the money that was rightfully theirs. This would prevent suppliers from using customers “like an interest free company credit card,” according to Ofgem.
Cash is king, and having the money on you rather than on the energy supplier means that households have a bit more money to support them through the cost of living crisis. It’s a small win for households, but a win nonetheless.
With the cost-of-living increasing and with switching domestic suppliers not being an option due to no deals lower than the price cap, we have put together some money-savings tips that can improve the circumstances. These tips won’t make a massive dent in high energy bills, but every little thing people can do to save energy and money can help.
- Switch off any electric appliances not in use, helping you save up to £55.
- Draught-proof all windows and doors as heat can escape through gaps around the house, costing you around £200 a year.
- Turn off any lights not in use which can save you up to £20 a year, with LED lights giving you even more savings.
For more ideas on how to save money on your energy bills – click here
Click here to run an energy price comparison, and see if you could be paying less for your gas and electricity.