UK watchdog sees no need to raise COVID-related allowance for energy companies

By Nora Buli

OSLO (Reuters) - Britain's energy watchdog has opened a consultation on its plans not to increase an allowance for energy providers introduced to help them cope with the coronavirus pandemic.

The watchdog, Ofgem, had given energy suppliers an allowance from April 1 this year to help the industry deal with the impact of the pandemic, and increased its price cap on the most widely used energy tariffs by around 9.2%.

The cap on electricity and gas bills came into effect in January 2019 and was aimed at ending what had been called "rip-off" prices by energy companies.

Ofgem calculates the cap using a formula that includes wholesale gas prices, energy suppliers network costs and costs of government policies, such as renewable power subsidies.

Measures to combat COVID-19 added an additional layer to the methodology, which is now up for final consultation.

Ofgem said a review showed that the British economy is forecast to grow at a faster rate later this year and unemployment is set to remain stable, and there was no evidence suppliers would incur material additional costs because of COVID beyond the assumptions made in April.

Suppliers' forecasts of debt-related costs for both credit and pre-payment meter customers for all the periods assessed were also not materially greater than their pre-COVID levels, the regulator said.

At the same time, Ofgem is proposing changes to its existing methodology, including additional filters on suppliers' forecast costs and that any additional COVID-19 costs be borne equally between suppliers and customers

The consultation https://www.ofgem.gov.uk/publications-and-updates/price-cap-consultation-reviewing-potential-impact-covid-19-default-tariff-cap-cap-period-seven runs until June 15.

(Reporting by Nora Buli; editing by Nina Chestney and Jane Merriman)