5 million protected after Ofgem extends safeguard tariff to almost 1 million vulnerable customers
Almost 1 million vulnerable households on poor value deals will make big savings on their energy bills from this month after Ofgem extended the prepayment safeguard tariff.
These customers will initially make annualised savings of around £115 on average because suppliers have to cut their prices to below the level of the safeguard tariff cap.
These savings will fall to around £66 a year from April when the level of the safeguard tariff rises due to higher energy costs.
The safeguard tariff stops suppliers from charging customers too much and ensures any price increase is justified by rises in underlying costs.
In April last year, Ofgem introduced the safeguard tariff for over 4 million prepayment customers, who also find it difficult to get a better deal and are more likely to be vulnerable.
After Ofgem extended the safeguard tariff to almost 1 million vulnerable customers last week on February 2, over 5 million households are now protected.
Ofgem adjusts the level of the cap twice a yearbased on a pre-defined methodology set by the Competition and Markets Authority to reflect the estimated underlying costs of supplying energy.
From April 1, the level of the safeguard tariff will rise by approximately £57 a year from £1,031 to £1,089 for a dual fuel customer who uses a typical amount of energy.
The increase in the safeguard tariff is mainly due to higher wholesale energy costs and policy costs to support low carbon forms of electricity generation.
Customers are still better off under the safeguard tariff which stops suppliers from charging customers too much.
When Ofgem introduced the safeguard tariff for prepayment meter customers in April last year, their bills fell by around £60.
While higher energy costs will push up the level of the safeguard tariff in April this year, they will still pay less than they would if they were not protected.
For example, their bills, which used to be amongst the highest in the market, are still expected to be around £35 lower than the current standard variable tariff paid by direct debit customers.