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Ofgem allows three energy firms to charge more than the official price cap

Patrick Christys
Mar 27, 2019


It turns out the only thing with less meaning than a Premier League footballer's contract is Ofgem's energy price cap.

A total of three energy suppliers have been granted an extension of the temporary derogations from Ofgem’s price cap in relation to their renewable standard variable tariffs (SVTs).

In layman's terms, this means that those companies will be allowed to charge more than the official price cap, which is supposed to come into force from April 1st this year - an ironic date that, isn't it? It's April Fool's Day after all.

Ofgem has set the energy price cap at £1,254 a year for dual fuel standard variable customers and £1,242 annually for prepayment customers.

This means that the energy regulator is buying itself some time (at customers' expense) until September 1st, 2019, to assess whether or not green energy tariffs should be exempt from the price cap.

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Ofgem doesn't want to penalise these green energy firms that offer a 100% renewable tariff because that could lead to a reduction in so-called 'green investment'.

The regulator previously said: “A key reason for not providing a blanket exemption for certain types of renewable tariffs is because they pose the risk of suppliers ‘gaming’ the exemption, for example by allocating renewable activities from across their portfolio to their SVT.

“Our decision to allow suppliers to apply for a derogation means suppliers may, on a case-by-case basis, be able to demonstrate that a particular SVT does support renewables, involves materially higher costs and that every customer on the tariff has made an active decision to do so. It would also be easy to monitor who has a derogation.”

The suppliers have been issued the extended time-limited derogation to review the their request for an enduring derogation – Ofgem says further information needs to be submitted for a “thorough and comprehensive” evaluation.

Charles Hargreaves, Deputy Director for Enforcement added: “Further analysis will enable the Authority to make an informed and final decision on whether to grant an enduring derogation. This is important, as if we were to make a decision without completing further thorough and comprehensive evaluation, then we may grant a derogation where one is not necessarily appropriate. This could result in consumers not being protected by the default tariff cap where such protection should be in place.

“Conversely, if we were to not grant a derogation where one in appropriate, it could risk the licensee being unable to fully recover additional costs it may face from supporting renewables or it may unnecessarily require it to change its business model.”

 

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