The amount energy suppliers can charge vulnerable homeowners has risen by £47 a year as a result of higher wholesale costs.
This rise will begin as of 1st October 2018 and affect around 5 million homes that are protected by the safeguard tariff, as the annual price for dual fuel customers will increase to £1,136.
Ofgem have stated that the rise is a result of increased wholesale gas and electricity costs due to a global rise in oil prices.
Speaking about the increase, Chief Executive of Ofgem, Dermot Nolan, said: “Around five million households, including some of the most vulnerable, remain better off and are no longer overcharged for their energy, thanks to the safeguard tariff.
“Any price rise for customers is unfortunate. But while the level of the tariff will rise in October, these customers can be confident that this increase is justified and that their energy bills reflects the real cost of supplying gas and electricity. There are also better deals on the market for those who want to save even more money by switching.”
Once these price changes take place in October, the safeguard tariff won’t be updated again until 1st April 2019.
What is the Safeguard Tariff?
The safeguard tariff was introduced by Ofgem as a way of protecting vulnerable homeowners from being charged too much for their energy. Ofgem set a price cap for the price energy suppliers can charge per unit of energy, they can charge less than this but never more. This means that eligible homes that use more energy will still pay more than the homes using less energy.
The safeguard tariff only applies to homeowners who:
- Prepay for their energy
- Receive Warm Home Discount (WHD)
The prices are reviewed every 6 months, which means that they can go up or down depending on wholesale prices of gas and oil.
The table below shows the current safeguard tariff levels, and the difference that the upcoming changes will make:
|Period||Electricity (non-Economy 7)||Electricity (Economy 7)||Gas||Dual fuel (non-Economy 7)|
|1 Apr 17 – 30 Sep 17||£547||£614||£503||£1,050|
|1 Oct 17 – 31 Mar 18||£528||£589||£503||£1,031|
|1 Apr 18 – 30 Sep 18||£562||£635||£527||£1,089|
|1 Oct 18 – 31 Mar 19||£581||£661||£555||£1136|