The Ofgem price cap is changing – what are YOUR energy rights?

Last week, Ofgem announced that it wanted to increase the number of times a year it changes the price cap. We quickly look at what this might mean for you and how to uphold YOUR energy rights at this difficult time.

What’s going on with the price cap?

Ofgem is the UK’s energy regulator and it sets a price cap on default tariffs (like standard variable rate deals) twice a year. This doesn’t necessarily mean you will only pay the amount set by the price cap, as it only takes typical usage into account. So if you use more energy, your bills will be more expensive. The price cap currently changes in October and April.

From 2023, Ofgem wants to tweak this cap FOUR times a year. That means your energy bills will change every three months as opposed to every six months.

Why is Ofgem doing this?

Ofgem says that energy suppliers need to be able to pass on the real-time cost of energy when costs are going up so they can survive. Dozens of energy suppliers have gone bust over the past year as the price of wholesale gas has soared. The industry has blamed these failures in part on the price cap, which limits how much energy companies can pass on rising costs to consumers and puts more pressure on suppliers to absorb rising costs. Ofgem has also argued that as soon as energy costs start coming down, consumers can benefit much sooner as the price cap will be reduced more often.

Why is this controversial?

Campaigners say the changes wouldn’t necessarily compel suppliers to reduce their costs sooner – the price cap only stops them hiking prices further than is reasonable. They also point out that in a time of rising costs, it’s the energy suppliers who would be protected rather than consumers. With the chief executive of E.ON UK only this week warning that prices will stay extremely high for at least 18 months, it’s clear that if the price cap rises more often, that will allow suppliers to hammer consumers more. There’s also a fear that suppliers will no longer be incentivised to offer longer fixed rate deals to customers if they think an ever-changing price cap will make such deals redundant.

They’re also proposing a “market stabilisation charge”, essentially a surcharge on better deals in the future when the market gets back to normal. This would further penalise people trying to get their energy costs back on an even keel after a punishing period.

Is this going ahead?

It looks like it. Ofgem want the new regime to kick in from October, which means bills would change for the first time on 1 Jan 2023.

What can I do about it?

Not a huge amount, I’m afraid. You’re still better off sticking to a standard variable rate deal, even if that puts you at the mercy of the changing price cap, as fixed rate deals will be far more expensive for the time being. Until that changes, your only options are to ensure you’re reducing all energy wastage and that your direct debit accurately reflects your usage. If your DD has gone up a ridiculous amount, challenge it. Your supplier must be able to justify its calculations to you. Many customers have found that these calculations have been incorrect (e.g. they’re based on the wrong property) and their DD’s have been reduced as a result.

What are my rights?

Unfortunately, the price cap is a legal maximum that suppliers point to if you say you’re paying too much for your energy. If it can justify the amount its charging you based on your actual usage, you have very little wiggle-room. However, your energy supplier also has a legal obligation under the terms of its gas supply license to treat you fairly. This is especially true if you’re vulnerable in any way – i.e. you have a disability or mental health problems, or you’re on a low income.

Your supplier needs to ensure that it has explored all options with you before moving you onto a prepayment metre and that any repayment plan is affordable and reasonable. If you don’t feel you’re being treated fairly, you can complain to the Energy Ombudsman. You can also ask to be put on your supplier’s Priority Services Register if you’re vulnerable so all your needs are taken into consideration – that way, you should be treated more compassionately and sensitively.

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