Thursday 1 August 2019

Ofgem confirms permanent energy price cap exemptions for three green suppliers

Ofgem confirms permanent energy price cap exemptions for three green suppliers

Clean power suppliers Ecotricity, Good Energy and Green Energy UK have been awarded permanent exemptions from the price cap for their standard variable tariffs (SVTs) by Ofgem.

That means the energy suppliers can charge consumers above the limit for SVTs set by the regulator as they derive all of their electricity from renewable sources.

The energy price cap currently stands at £1,254 a year on average for dual fuel standard variable customers and £1,242 annually for prepayment meter (PPM) customers.

Yesterday, the Competition and Markets Authority (CMA) recommended Ofgem should extend the price cap for PPM customers beyond 2020 to protect them from high prices as they are not able to switch suppliers as easily as other consumers.

The latest announcement from the regulator follows temporary derogations granted to the three suppliers in relation to their renewable SVTs earlier this year.

The suppliers' tariffs had to demonstrate three outcomes to be granted a derogation:

  • The tariff is an SVT that consumers have chosen to be on
  • By consumers being on the tariff, support is given to generation and production of renewable energy to an extent that is materially greater than that which is brought about as result of subsidies, obligations or other mandatory mechanisms
  • The cost to the licensee of supplying electricity/gas by virtue of the tariff is materially greater than the level of the default tariff cap for reasons that are directly attributable to the support that the tariff provides to renewable energy.

A spokesperson from Ofgem told ELN: "A significant amount of evidence was submitted by the suppliers during the application process. The temporary derogations were granted following an initial assessment of the evidence.

"We have always stated that the purpose behind granting the temporary derogations was so it enabled Ofgem sufficient time to conduct a full analysis of the evidence, obtain additional evidence where required and assess the additional evidence. Following this full assessment, we decided to grant enduring derogations."

Juliet Davenport, CEO and Founder of Good Energy, added: “Good Energy is exempt from the price cap because our tariffs genuinely support the growth of renewables and clean technologies. And because our customers have actively chosen to contribute to that support.

“If we are going to tackle climate breakdown, individuals must be empowered to choose to be part of the solution. We know customers want the ability to make that choice and recently it has been complicated by energy companies taking shortcuts to offer cheap ‘green’ tariffs.

“When you choose a renewable tariff, you are choosing more than ‘net zero’ or some cheap certificates. You are choosing regeneration — support for the growth of clean energy. Ofgem’s decision recognises that Good Energy’s model does precisely this.”

Written by

Bruna Pinhoni

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