Millions of Britain’s poorest households will be hit by a 5.5% increase in energy bills – after watchdog Ofgem changed its “safeguard tariff”.
They will have to find up to £57 a year more as the cap is raised and higher energy costs are factored in.
Before today, the cap was set at £1,031 for five million households for their energy bills. That has been raised to about £1,089.
Ofgem has said that by extending the safeguarding tariff, an additional one million customers will be able to save £60 a year from what they would usually pay.
However, this is actually a drop in annual savings on average – from £115 down to £66, when the tariff rises by 5.5% in April due to higher energy costs.
Ofgem boss Dermot Nolan said: “Even when energy costs rise, people on the worst deals are better off under the safeguard tariff as they can be sure that they are not overpaying for their energy and any rise is justified.”
He told BBC Radio 5Live: “It’s OK to do so (rise prices by 5.5%) because we’ve gone over carefully to make sure it’s only an efficient rise in price. Prices can rise, but prices can also fall.”
When asked what he could now say to energy companies that announce inflation-busting price rises, he added: “I wouldn’t say ‘fair enough’ – I would remind companies that they need to be efficient as possible.”
In its official statement, Ofgem said the changes to the safeguard tariff will come into effect from April.
It says: “The level of the safeguard tariff will rise by approximately £57 a year from £1,031 to £1,089 for a dual fuel customer who uses a typical amount of energy.
“The increase in the safeguard tariff is mainly due to higher wholesale energy costs and policy costs to support low carbon forms of electricity generation.”
Energy companies are criticised regularly for blaming price increases on rising wholesale costs.
Campaigners complain the firms are quick to up prices during the colder winter months and announce price freezes or reductions during the spring and summer when energy use is lower.
Ofgem sets the rate of its safeguard tariff twice a year in February and August for customers on pre-pay meters or who get the Warm Home Discount.