Households face £24 extra a year in energy bills

The ‘Adjustment Allowance’ was introduced in winter 2020 to help suppliers deal with the economic fallout

The Big Zero report

Customers with standard variable tariff could see their bills rise by £23.69 from 1st April.

Ofgem has unveiled plans to adjust the default tariff price cap in response to growing bad debt costs as a result of the coronavirus pandemic.

The ‘Adjustment Allowance’ was introduced in winter 2020 to help suppliers deal with the economic fallout – that means that household energy bills rise to compensate for the number of unpaid bills.

In August, the regulator announced a reduction in the price cap by £84 annually in response to changes to the wholesale energy price during the first lockdown.

Jonathan Brearley, Ofgem’s Chief Executive Officer, said: “Due to the impact of Covid-19 and higher levels of unemployment, more
households are struggling to pay their energy bills. The existing price cap methodology includes an allowance for suppliers to recover the cost of writing off debt from unpaid bills.

“However, the pandemic has resulted in anticipated bad debts rising to levels that aren’t covered by the existing cap.

“We believe it’s in customers’ interests to allow suppliers to start to recover some of these additional costs from the next price cap period starting on April 1. This is necessary to ensure that consumers continue to benefit from a properly functioning energy market,
which is in all of our interests.”

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