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Market research & Insight

Issue 918 | Price Cap Levels October 2019

Tom  Faulkner Tom Faulkner Analyst

Ofgem decision: Price Cap Changes for Winter 2019-20 Gas and Electricity Alert 9 August 2019 Tom Faulkner   Headline Assessment Documents PPM Update – Ofgem Default Tariff Cap Update – Ofgem Approach to Third Cap Period - Ofgem Date Published 07/08/19 Impact Classification High: Sr Action if Desired Implement changes for customers on price-capped tariffs 1 Assessment & recommendation Ofgem has announced the changes to the level of the default tariff cap and the pre-payment meter (PPM) tariff cap for the period running from 1 October 2019 to 31 March 2020. These are the third and sixth periods respectively for the two price caps. The decision sets the baseline level from which suppliers can derive the maximum charge they may impose on eligible customers, depending on their level of consumption. This covers gas, electricity and dual fuel customers paying by direct debit (DD), standard credit, and prepayment. Published on 7 August 2019, the changes see a decrease of £75 annually for a typical dual fuel customer on a default tariff paying by direct debit, and a £25 reduction for a PPM customer with typical consumption. The main reason for the drop is the decrease in wholesale prices, but there were also changes in policy and operating costs, headroom, VAT and EBIT. Additionally, the PPM cap used a new methodology, switching to adopt an adapted version of the Ofgem methodology that is used for the default tariff cap, rather than the Competition and Markets Authority’s (CMA) original methodology. This change in methodology will make PPM customers worse off by ...

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