Ofgem extends protection measures to shield customers from market volatility
The energy market will not be returning to its pre-crisis norms anytime soon, despite a recent drop in wholesale costs and price cap forecasts – after Ofgem extended measures to protect the energy market amid historic volatility.
Ofgem confirmed that charges on suppliers for luring customers from other firms will remain in place for another 12 months, alongside a ban on special deals for new customers.
The watchdog has extended market stabilisation charges and the moratorium on acquisition-only tariffs until March 2024, as it looks to shield customers from historic price volatility.
Ofgem said: “While we welcome the recent fall in wholesale prices, we remain mindful that there is a reasonable risk of further, sustained price shocks and resulting consumer detriment
“Our view is that retaining both measures beyond March 2023 will maintain the resilience of the GB energy sector and is in the interests of consumers.”
The announcements follow Ofgem ordering suppliers to stop forced installations of prepayment meters – as first reported by City A.M.
It has asked all suppliers to review the use of court warrants to enter the homes of customers in debt.
The regulator has responded swiftly to an investigation from The Times, which uncovered debt agents for British Gas breaking into vulnerable people’s homes to fit prepayment meters.
Ofgem has launched an investigation into British Gas following the allegations.
Measures brought in with energy bills still high
Gas prices have dipped from last year’s eye-watering peak of £8.75 per therm, with the UK benchmark currently trading at £1.43 per therm.
This dip has been reflected in lowered estimates for the price cap – which Cornwall Insight predicts will fall to around £2,200 per year.
Nevertheless, this is still double pre-crisis expectations for energy bills, with customers vulnerable to higher costs as Chancellor Jeremy Hunt reduces the level of funding for support packages from April.
The market stabilisation charge is a temporary measure brought in by Ofgem which requires all domestic suppliers acquiring a customer to make a payment to the supplier that is losing the customer.
It was brought in to ensure firms were not financially exposed through long-term hedging for households – a practice Ofgem is eager to encourage.
The ban on acquisition-only tariffs disincentivises switching in an industry grappling with ultra-high energy bills and the collapse of 30 suppliers in the past 18 months.