Vulnerable households face energy price rise

The energy bills of five million of the UK's most vulnerable households are set to rise by £47 a year.

Energy regulator Ofgem is raising its safeguard tariff because of higher wholesale energy costs.

The tariff, which protects five million prepayment meter and vulnerable customers from being overcharged on poor value deals, will be £1,136 for dual fuel customers from 1 October.

Energy suppliers must keep their prices below the level of the safeguard.

The level is adjusted twice a year to ensure any price increase is justified.

In February, Ofgem extended the tariff to protect one million more vulnerable customers who are on poor value standard variable tariffs and who receive the government's Warm Home Discount.

Since then, the global rise in oil prices has fed through to wholesale gas prices, which affect both domestic heating and electricity generation.

Ofgem chief executive Dermot Nolan said: "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."

Energy and Clean Growth Minister Claire Perry said that the households benefitting from the safeguard tariff were paying around £60 (5%) less on their bills than Big Six customers on standard variable tariffs.

She added that, despite the rise in the tariff, "these consumers are still better off under a cap".

"We're bringing in a price cap for all standard variable and default tariffs later this year, protecting a further 11 million households from unfair price rises. Consumers can save even more if they vote with their feet and switch supplier," she said.

However, the decision to raise the tariff also attracted criticism, with Stephen Murray, energy expert at price comparison website MoneySuperMarket, saying: "Rather than bring bills down, the cap has simply made them even more expensive for customers who are already struggling.

"If households want to bring their energy bills down, they have to do it themselves. If you do nothing, you are in serious danger of your bills continuing to rise.

"If you do something and switch to a fixed-rate tariff today with a Big Six or emerging supplier, you will see your annual bills decrease dramatically, by £250 or more."

And Alex Neill, Which? managing director of home products and services, said: "This is bad news for the most vulnerable consumers, particularly given the safeguard tariff was already far from the cheapest deal on the market.

"It demonstrates why energy companies should be doing much more to get all their customers off expensive tariffs."