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The energy price cap is set to be lifted to help suppliers recover a record £3bn of bad debt accrued through unpaid gas and electricity bills, the industry regulator has announced.
Ofgem said on Friday it was consulting on proposals for a one-off cap adjustment of £16 – equivalent to around £1.33 a month – to be paid between April 2024 and March 2025.
Those on pre-payment meters would not be affected by the plan, the watchdog said, adding the sum it wanted to impose on households was down on an initial proposal of £17.
The energy watchdog said the £3bn debt pile was a result of the impact of the energy-driven cost of living crisis on household budgets
“The scale of this debt means that it is crucial that suppliers have sufficient funding to ensure they can meet the strict regulations Ofgem has in place around how they treat customers facing payment difficulties.
“This adjustment to the price cap will ensure suppliers have the resources to support customers struggling with debt.”
Ofgem is anxious to avoid a repeat of severe financial pressure on many suppliers after dozens, including Bulb, collapsed amid a spike in wholesale energy costs in 2021.
That crisis added about £82 to every single customer’s bill at the time as companies with more robust business models were appointed to take on the households left stranded.
The price cap, which has come down since the unprecedented bills witnessed last winter, not only reflects market prices but also contains other mechanisms to allow firms to recover limited costs.
Tim Jarvis, Ofgem’s director for markets, said: “We know that cost of living…
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