By Nora Buli
OSLO (Reuters) -Britain's energy regulator is considering a one-off increase to its price cap on energy bills to reduce the risk of suppliers going bust amid record levels of customer energy debt, it said on Thursday, in a proposal condemned by consumer campaigners.
Ofgem said energy debt had reached a record 2.6 billion pounds ($3.2 billion) due to a combination of higher wholesale energy prices and wider cost of living pressures.
To reduce the risk of energy firms going bust, or leaving the market due to unrecoverable debt, Ofgem said it was holding a consultation on whether to add a one-off adjustment to the price cap it sets.
An analysis by the regulator showed this could result in a temporary rise in consumer bills of up to 17 pounds per year, or around 1.50 pounds per month, on average.
This was weighed against the risk of customers facing even higher costs and poorer standards of service if suppliers went out of business, as seen during the 2021 energy crisis, when around 30 suppliers went out of business, Ofgem added.
"We know that households across the country are struggling with wider cost of living challenges, including energy, so any decision to add costs to the price cap is not one we take lightly," said Tim Jarvis, Ofgem's director general for markets.
The proposal was condemned by consumer campaigners at the End Fuel Poverty Coalition.
"The idea that energy bills should go up due to bad debt is dangerous", it said, adding energy suppliers made more than 2 billion pounds in profits in the first half of 2023.
"Rather than pass on more increases to energy bills, the government needs to work with energy firms to introduce a ‘help to repay’ scheme to help get Britain's households back onto an even keel," group coordinator Simon Francis said.
Most households in Britain received a 400 pounds discount on their energy bills last winter via a government subsidy, but the scheme is not in place this winter.
The consultation will close on Nov. 2, with Ofgem to publish recommendations based on the feedback received this winter.
($1 = 0.8120 pounds)