This month Ofgem has introduced a new fee in its price cap which allows energy companies to recoup energy debts from customers who have fallen behind – and only certain energy customers will pay it
Energy bills have become much cheaper this month as the price cap has dropped – but some customers will be paying an extra charge from now on.
The Ofgem price cap for typical direct debit paying households has dropped to £1,690 from £1,928. The price cap is a cap on how much you can be charged per kilowatt of energy you use – not a cap on your bills. This means if you use more energy your bills will be more expensive. On average, those on a standard variable tariff (SVT) should see a saving of around £12 for every £100 of gas or electricity they use.
However, this month Ofgem has introduced a new fee in the price cap which allows energy companies to recoup energy debts from customers who have fallen behind. The additional payment sits at £28 a year and equates to £2.33 a month and only affects households paying their energy bills by direct debits or standing credit. Ofgem says the charge will be temporary but has not confirmed exactly how long it will be in place.
In its price cap announcement, Ofgem explained: “The temporary payment is partly offset by the end of an allowance worth £11 per year that covered debt costs related to the Covid-19 pandemic.” Customers who are on a prepayment meter will not have to pay the extra charge as – according to Ofgem – many do not build up the same level of debt as credit customers because they top up as they go.
While the cap for energy bills has dropped, the standing charge has also increased this month. This is included in the price cap and will affect those paying by direct debit and on receipt of bills. The standing charge is a fixed amount that customers must pay on their energy bills no matter how much gas and electricity they use. Standing charges are used to pay for things such as the upkeep of the energy grids and the amount varies depending on where you live in the UK.
Ofgem also confirmed that standing charges for prepayment customers would remain at the same level as those who pay by direct debit. Previously, those on prepay meters had to pay a higher standing charge as it cost energy firms more to get gas and electricity to them.
In its price cap announcement, the energy regulator confirmed it was “levelling out” standing charges and direct debit and prepayment customers would pay the same. This month’s price cap reflects these levelled-out payments. According to Ofgem, prepayment customers will save around £49 per year – or £52 less including VAT – while direct debit customers will pay £10 more each year.
