Households across the country may have to shoulder a hike on their energy bills from the beginning of April 2021 because of Covid-19 – under new proposals from Ofgem.
Here’s what you need to know.
What have Ofgem proposed?
Regulator Ofgem has proposed an increase to the maximum many households can be charged on their bills, because the pandemic is putting pressure on energy companies.
Ofgem said it is considering a £21 per household Covid hike to the default price cap when it next comes up for review.
This would come on top of any other changes made to the amount energy companies can charge customers on their default rates.
The current price cap, which runs between October 2020 and the end of March 2021, is set at £1,042 per household for both gas and electricity.
Ofgem reviews this cap every six months, and was already widely expected to hike the cap in February when it announces the new cap which will come into force in the beginning of April.
Energy prices have gone down in the last three consecutive reviews. However wholesale energy prices have recovered from the lows they hit earlier this year when demand for fuel collapsed because of the Covid-19 crisis.
What have Ofgem said?
Ofgem said the potential £21 hike will help remove some of the pressure on energy companies who are facing high levels of unpaid bills as households struggle to keep up during the pandemic.
The hike will let them recover some of the estimated £200 million of bad debt that customers have collected.
When will the consultation end?
Consultation on the proposals will run until December 21, 2020, and Ofgem will share its decision in February before announcing the new price cap.
Many of Britain’s biggest energy companies have been forced to lay off thousands of workers while under pressure from Covid.
E.On became the latest on Thursday when it announced around 695 jobs will be cut. It followed Centrica, which announced 5,000 cuts in June, and Ovo, which said it would cut 2,600 jobs in May.
Some of these jobs are likely to have been cut anyway, however Covid-19 has put serious pressure on the companies.