Ofgem has announced it will almost double the allowance it grants energy suppliers to recover some of the bad debt costs from the pandemic, a move which will increase consumer bills.
The pandemic left many customers in Britain not being able to pay their energy bills in full and created additional debt-related costs for companies, the watchdog argued.
These costs were found to be greater than previously expected and therefore Ofgem will set an additional adjustment allowance of £12.02, taking the amount to £30.01 per typical dual fuel credit customer.
It will be recovered over 12 months from April 2023 to March 2024 via Ofgem’s price cap scheme which sets a maximum price that energy suppliers can charge consumers for each kilowatt hour (kWh) of energy they use and is reviewed every three months.
“We have concluded that it is in customers’ interest to allow suppliers to recover the additional debt-related costs related to COVID-19 from April 2023,” Ofgem said.
The increase in bills comes a day after British utility Centrica, which owns British Gas, posted a tripling in profits to a record £3.3bn last year on soaring energy prices and production.
Late last year, the government said it could no longer deliver a two-year energy support scheme for households that had been promised by previous Prime Minister Liz Truss which would have kept annual bills at around £2,500 per year.
The cost of an average household energy bill will rise to 3,000 pounds a year from April.
UK wholesale gas prices, which soared to record highs last year, have fallen since last August when they hit a peak over plummeting supply of Russian gas to Europe following Russia’s invasion of Ukraine.
Nevertheless, prices remain historically high, meaning consumers are unlikely to feel much better off.
Reuters – Nora Buli, Nina Chestney, and Chandini Monnappa
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