Ofgem extends its safeguard tariff to 5m homes - but at a higher price

Courtney Goldsmith
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Ofgem's bright idea has been met with criticism from consumer groups (Source: Getty)

The energy regulator today announced it would extend a cap on vulnerable customers' energy bills to 1m more households, but higher wholesale energy costs have caused it to push the cap higher.

Ofgem's cap, the so-called safeguard tariff, which stops suppliers from charging customers too much, has been extended to a total of 5m homes after being first introduced last year.

The cap was set at £1,031, but from April it will be hiked to £1,087, meaning millions of households' savings will fall from £115 a year on average to £66.

"It is right that there is support for the most vulnerable who may be less able to benefit from what is a highly competitive market," said Lawrence Slade, the chief executive of Energy UK.

“That the cap will rise from April does show how energy costs, which are out of any suppliers direct control, are increasing and underlines why it is critical any broader cap must be cost-reflective and protect competition which is delivering benefits for consumers.”

Energy and clean growth minister Claire Perry said the move was a "positive step", but that energy tariffs are still too high.

Ofgem's chief executive Dermot Nolan, who last month apologised to vulnerable customers for not capping their bills earlier, said protecting those customers was a priority for Ofgem.

“Ofgem is working with the government to protect all customers on poor value default deals, such as standard variable tariffs, from being charged too much for their energy as soon as possible. Our aim is to protect those who do not switch, while making it easier for those who do to get a better deal," Nolan said.

Consumer groups were generally disappointed by the rise in the price cap level, though they welcomed the move to extend it.

Martin Lewis, founder of MoneySavingExpert said it "leaves the whole thing feeling somewhat flaccid" while Stephen Murray, energy expert at MoneySuperMarket said it was further proof that price caps "just don't work".

The government hopes to implement a price cap on expensive default tariffs by next winter.

Read more: Energy challenger warns wider price cap appeal rights could cause delays

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