ENERGY suppliers will be able to charge households an extra £23.69 a year to help cover coronavirus related debts.
The watchdog will let providers push up bills under its energy price cap to plug the gap in funds caused by households being unable to pay their bills.
Energy providers can push up household bills by £23.69 a year Credit: Alamy
Ofgem has agreed to raise the Adjustment Allowance, which was introduced in 2020 as a one-off coronavirus measure so suppliers could support households through the pandemic.
It increased the cap by £15 a year but the watchdog has decided to hike the allowance again, adding even more onto bills.
The idea is to help suppliers claw back some of the cash they have lost through coronavirus measures agreed with the government.
These include not cutting off households who are unable to pay their bills or providing emergency credit to those on payment metres.
What to do if you can’t pay your bills
FALLING behind on your energy bills can be extremely stressful.
If you’re struggling to pay what you owe, contact your supplier as soon as possible.
Your provider has to help you come up with a solution, and you should be able to negotiate a deal that works for you both.
One option is to agree a payment plan where you pay off your debts in affordable instalments.
You may be able to pay off your debts directly from your benefits through the Fuel Direct Scheme.
A fixed amount will automatically be taken to cover what you owe plus your usage.
To be eligible, you must be getting one of the following benefits:
- Income-based jobseeker’s allowance
- Income support
- income-related employment and support allowance
- Pension credit
- Universal Credit (but only if you’re not working)
If you cannot come to an agreement with your supplier, they may try to force you to get a prepayment meter installed.
In very rare cases, where you refuse to negotiate, your supplier might threaten you with disconnection.
The cap affects around 11million households on standard variable tariffs and prepayment metres, and is reviewed twice a year.
It is next due to be reviewed on Friday and will come into affect on April 1 2021.
While we don’t know exactly how much it will change by yet, this latest decision by Ofgem implies that bill payers can expect to payments on these deals to go up.
It is currently set at £1,042 a year but the industry generally expects it to rise to £1,108 a year from April.
The watchdog argues it is in customers’ interests to begin allowing energy providers to recover some of the costs now so bills don’t rise by staggering amounts in the future.
But comparison site USwitch says the move could push three million households into debt.
Octopus Energy founder Greg Jackson has slammed the decision as “absolutely outrageous” after failing to see a “significant increase” in customers not paying their bills because of the pandemic.
He said: “The price cap will already go up significantly at the end of this week because of wholesale costs.
“Adding unnecessarily to costs for those on the highest tariffs will hurt customers at a time when many are struggling.
“The best companies in the world work hard to charge customers less.
“If the dinosaur companies who lobbied for a hike in the price cap really cared about their customers, they would improve their efficiency to keep prices down instead of charging long-standing customers more.”
Natalie Hitchins from Which? is urging customers struggling with rising debt to speak to their supplier who will be able to offer support.
She added: “Customers on standard or default tariffs, usually the most expensive deals on the market, should shop around and consider switching as they could save around £160 a year.”
Bill payers who are working from home can also save cash on energy by claiming tax back.
Tax can be claimed back on up to £6 a week to help cover the additional costs of working from home, such as higher energy bills.
The saving works out at £63 a year – here we take you through how to do it.
An Ofgem spokesperson added: “During this exceptional time we expect suppliers to set their prices competitively, treat all customers fairly and ensure that any household in financial distress is given access to the support they need.”