Energy price cap to fall but bills to include ‘temporary’ charge to help tackle record debt
The energy price cap is to fall by £20 a month, the industry regulator has announced, but households are to face an additional “temporary” charge to help suppliers support struggling customers with record levels of debt.
Ofgem confirmed a 12% price cap reduction will take effect from 1 April, taking the annual energy bill for a typical household paying by direct debit for gas and electricity to £1,690.
The current level, in place from January to March, is £1,928.
The fall reflects lower wholesale prices, with natural gas costs over the peak winter season falling across Europe due to higher stockpiles.
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A mild winter has been a factor in the drop.
The adjustment by Ofgem, while some relief for household budgets squeezed by the tough economy, still leaves the cap more than 50% up on pre-crisis levels.
The regulator confirmed alongside the cap figure that it was taking action to tackle a record £3.1bn in bill arrears, though prepayment meter customers would not be affected.
Ofgem’s plans aim to bolster support for energy customers in debt to their suppliers. Pic: PA
“To address this challenge in the short-term, Ofgem will allow a temporary additional payment of £28 per year (equivalent to £2.33 per month) to make sure suppliers have sufficient funds to support customers who are struggling”, its statement said.
“This will be added to the bills of customers who pay by direct debit or standard credit and is partly offset by the termination of an allowance worth £11 per year that covered debt costs related to the COVID pandemic.”
Ofgem said its wider action would include further closing the gap between the higher charges that prepayment meter customers pay and what most other households face.
It said those on prepayment meters would save around £49 per year while direct debit customers would pay £10 per year more.
The watchdog said that the new figures, taken together, meant that bills would still fall to their lowest level since Russia’s invasion of Ukraine in February 2022.
Ofgem says lower unit charges will mean that bills will fall for everyone in April, despite the debt aid elements. Pic: iStock
Russia’s vast gas supplies to the continent were shut down shortly after its military action began, forcing a scramble for replacement volumes.
Much of the void has been filled by additional supplies from Norway and heightened shipments of liquefied natural gas (LNG).
Market experts have warned that a return to pre-crisis energy prices is unlikely to occur given the new realities over the source of supply hampered, in the short term at least, by attacks on shipping in the Red Sea that have forced LNG cargos to make longer journeys.
The trend of higher prices has led to questions over whether the price cap, initially introduced to prevent rip-off charges, has become a barrier to competition. Ofgem is working with the government to address the cap’s future.
It is now utilised by the vast majority of homes in the wake of the supplier crisis that began in 2021 that saw dozens of operators collapse, including Bulb.
Fixed deals have been hard to come by ever since but there are some that have undercut the price cap.
Read more:
What is the price cap – and how will it affect my bills?
Research for professional services firm KPMG, released separately on Friday, suggested that 48% of households believed the price cap was a barrier to fixed-term offers by suppliers.
A third of respondents said they no longer shopped around because of the cap.
Price comparison site uSwitch said Ofgem’s wider action on elements of the price cap bill should help improve the volume of offers.
Its director of regulation, Richard Neudegg, said: “Consumers have been patiently waiting for better tariff choices, and many are desperate to take advantage of cheaper rates.
“If you are on a standard variable tariff, now is the time to start keeping an eye out for deals.
“The end of the Market Stabilisation Charge also on 1st April will be a positive step, taking out an unnecessary premium on deals.
“However, Ofgem’s decision to extend the Ban on Acquisition-only Tariffs for another year is a gamble.
“Although this could be cut to six months, while it’s in play, fixed deals risk being more expensive than they would otherwise be, at a time when customers are finally hoping to lock in some certainty.”
A woman who claimed to be Madeleine McCann has pleaded not guilty to stalking the missing girl’s parents.
Julia Wandel, 23, is accused of making calls, leaving voicemails, and sending a letter and WhatsApp messages to Kate and Gerry McCann.
Wandel, from southwest Poland, is also accused of turning up at their family home on two occasions last year and sending Instagram messages to Sean and Amelie McCann, Madeleine’s brother and sister.
It is alleged she caused serious alarm or distress to the family between June 2022 and February this year when she was arrested at Bristol Airport.
She claimed to be Madeleine on Instagram in 2023, but a DNA test showed she was Polish.
Karen Spragg, 60, who is alleged to have made calls, sent letters and attended the home address of Mr and Mrs McCann, also denied a charge of stalking at Leicester Magistrates’ Court.
Wandel was remanded back into custody while Spragg, from Caerau in Cardiff, was granted conditional bail.
Both women are due to appear at Leicester Crown Court for trial on 2 October.
Karen Spragg arriving at Leicester Magistrates’ Court on Tuesday. Pic: PA
Madeleine’s disappearance has become one of the world’s most mysterious missing child cases.
She was last seen in Portugal’s Algarve in 2007 while on holiday with her family.
Her parents had left her in bed with her twin siblings while they had dinner with friends at a nearby restaurant in Praia da Luz when the then three-year-old disappeared on 3 May.
A man suspected of kidnapping Madeleine will not face any charges in the foreseeable future, a prosecutor told Sky News earlier this year.
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