Households face hike in energy bills due to Covid ‘bad debt’
Millions of households could see their energy bills hiked by £21 in order to compensate suppliers for unpaid customer debts incurred due to the coronavirus pandemic.
Energy watchdog Ofgem is mulling whether to increase the energy price cap for 11m homes to allow suppliers to recoup these “bad debts”.
The regulator said that it expected the number of unpaid bills to increase this winter due to rising unemployment.
Anna Rossington, Ofgem’s deputy director for retail price protection, said: “The existing price cap methodology includes an allowance for suppliers to recover the cost of bad debt expected in normal economic times.
“But the pandemic has resulted in anticipated bad debts rising to levels that aren’t covered by the cap.”
Ofgem added any increase would be partially offset by the ending of a temporary £15 increase to reflect the outcome of a judicial review into how it calculated suppliers’ wholesale energy costs in the first cap period.
The net impact on bills of these two changes would be an increase of around £6, it said.
Greg Jackson, chief and founder of challenger supplier Octopus Energy, said: “Legacy suppliers charge long-standing customers hundreds of pounds more than new customers. If they cared about customers, they could handle Covid debt by reducing this disparity, rather than exacerbating it by lobbying for a hike in the price cap.
“Ofgem’s single biggest success of the last decade has been the price cap – saving billions for customers and finally forcing dinosaur companies to become more efficient. They should resist all attempts to undermine it.”
The energy price cap was reduced by £84 in October and now stands at £1,042. The cap was introduced at the behest of government to protect consumers from overpaying on their electricity bills.
Ofgem reviews the level of the cap twice a year and adjusts it as it considers appropriate.