British households may have to shoulder a hike on their energy bills from the beginning of April because of coronavirus, under new proposals from Ofgem.
The regulator has proposed an increase to the maximum many households can be charged on their bills, because the pandemic is putting pressure on energy companies.
Ofgem said it is considering a £21 per household Covid hike to the default price cap when it next comes up for review.
This would come on top of any other changes made to the amount energy companies can charge customers on their default rates.
The current price cap, which runs between October 2020 and the end of March 2021, is set at £1,042 per household for both gas and electricity.
Ofgem reviews this cap every six months, and was already widely expected to hike the cap in February when it announces the new cap which will come into force in the beginning of April.
Energy prices have gone down in the last three consecutive reviews. However wholesale energy prices have recovered from the lows they hit earlier this year when demand for fuel collapsed because of the Covid-19 crisis.
Ofgem said the potential £21 hike will help remove some of the pressure on energy companies who are facing high levels of unpaid bills as households struggle to keep up during the pandemic.
The hike will let them recover some of the estimated £200 million of bad debt that customers have collected.
Consultation on the proposals will run until December 21, and Ofgem will share its decision in February before announcing the new price cap.
Many of Britain’s biggest energy companies have been forced to lay off thousands of workers while under pressure from Covid.
E.On became the latest on Thursday when it announced around 695 jobs will be cut. It followed Centrica, which announced 5,000 cuts in June, and Ovo, which said it would cut 2,600 jobs in May.
Some of these jobs are likely to have been cut anyway, however Covid-19 has put serious pressure on the companies.
The proposal faced criticism from a challenger supplier and a campaign group on Friday.
Octopus Energy chief executive Greg Jackson said: “Legacy suppliers charge long-standing customers hundreds of pounds more than new customers. If they cared about customers, they could handle Covid debt by reducing this disparity, rather than exacerbating it by lobbying for a hike in the price cap.
“Ofgem’s single biggest success of the last decade has been the price cap – saving billions for customers and finally forcing dinosaur companies to become more efficient. They should resist all attempts to undermine it.”
Cat Hobbs, the director of campaign group We Own It, which wants to nationalise energy supply, said: “These proposals from Ofgem are absolutely shocking. The idea that at a time when millions of people are struggling to pay their bills, the solution would be to charge people even more is farcical.”
Emma Pinchbeck, chief executive of trade body Energy UK, said: “Just like every other business, there have been challenges from the pandemic. It is the independent regulator’s job to hear views, look at the evidence, and weigh up how to support energy retailers through their own commercial difficulties in the pandemic, so that they can continue to supply and support all customers.”