Ofgem protects 1m more energy customers but lifts cap on bills

Ofgem has acted on its pledge to protect almost 1m more households from rising energy prices but the cap on what those customers will pay will increase.

The energy regulator said the number of vulnerable customers protected by its safeguard tariff was now more than 5m. The tariff is intended to stop suppliers charging customers too much and links price increases to underlying energy costs.

Customers covered by the plan from February will start to save about £115 a year on average. But that amount will drop to about £66 a year from April because the cap will rise to reflect higher energy costs for suppliers such as Centrica's British Gas and SSE.

From 1 April the safeguard tariff will rise by about £57 a year to £1,089 for a dual-fuel customer who uses a typical amount of energy. Ofgem stressed that, despite this rise, those customers will still pay less than they would have without its intervention.

At 09:04 GMT Centrica shares were up 1.5% to 126p. Shares of SSE, which is divesting its household energy business, were up 0.6% to £11.98.

Ofgem has come under pressure over high fuel bills, particularly for old or poor customers who do not shop around for the best deal and stick with a supplier’s often expensive standard rate. The government is working on a general cap for household energy prices and the change in approach has put Ofgem on the back foot.

In January Dermot Nolan, the regulator’s chief executive, acknowledged he should have done better when MPs criticised his “passive” approach to regulating energy bills.

Announcing the measures, Nolan said: "Protecting vulnerable customers is a priority for Ofgem. Even when energy costs rise, people on the worst deals are better off under the safeguard tariff as they can be sure that they are not overpaying for their energy and any rise is justified.”