- Safeguard tariff protects households from overpaying for their energy and from unjustified price rises
- Level of safeguard tariff to rise by £47 per year in October due to higher wholesale energy costs
- 5 million prepayment meter and vulnerable households who are protected by safeguard tariff are still better off
Ofgem has updated the level of the safeguard tariff, which protects 5 million households from being overcharged, based on the latest estimated costs of supplying energy.
From October 1, the level of the safeguard tariff will rise by £47 per year for dual fuel customers to £1,136.
The rise is due to higher wholesale gas and electricity costs since the level was last updated in February. This is mostly due to the global rise in oil prices feeding through to wholesale gas prices which impacts both domestic heating and electricity generation.
The safeguard tariff stops suppliers from overcharging customers on poor value deals because suppliers have to keep their prices below the level of the safeguard tariff. It was introduced in April last year for prepayment meter customers.
In February this year, Ofgem extended the safeguard tariff to protect 1 million more vulnerable consumers who are on poor value standard variable tariffs and receive the Government’s “Warm Home Discount”.
Ofgem adjusts the level of the safeguard tariff twice a year, based on a pre-defined methodology set by the Competition and Markets Authority to reflect the estimated underlying costs of supplying energy.
This ensures that any price increase is justified by rises in underlying costs.
Ofgem is currently working to put in place a price cap for the remaining estimated 11 million households on poor value default tariffs by the end of the year following publication of a statutory consultation later this month.
Dermot Nolan, chief executive of Ofgem, said: “Around 5 million households, including some of the most vulnerable, remain better off and are no longer overcharged for their energy thanks to the safeguard tariff.
“Any price rise for customers is unfortunate. But while the level of the tariff will rise in October, these customers can be confident that this increase is justified and that their energy bill reflects the real cost of supplying gas and electricity. There are also better deals on the market for those who want to save even more money by switching.
“Ofgem is working to put in place price protection for 11 million more households on poor value deals so that everyone pays a fairer price for their energy.”