Households are being advised to check if they are with three suppliers whose default tariffs are exempt from the current price cap.
Green Energy, Good Energy and Ecotricity are allowed to charge more than the current Ofgem set cap of £1,277 as they hold specific tariffs that support the production of renewable gas or electricity.
Thanks to the ongoing energy crisis, prices are soaring and more suppliers are in danger of going bust.
There are three suppliers that offer tariffs which do not come under Ofgem’s price cap
Those seeing fixed deals end or being shunted to another supplier could find annual bills far higher than before – but some households are with firms that have tariffs that are excluded from this safety net.
This is because they have a derogation from the price cap under rules from the energy watchdog.
This is Money takes a look at which tariffs are affected, how much more these companies are charging and why they have been given an exemption.
Which tariffs are currently exempt and how much do they cost?
Good Energy customers with its Good Energy Electricity SVT and Good Energy Gas SVT tariffs are set for huge hikes.
Good Energy supplies energy to 94,000 customers, both business and domestic.
The current SVT price is £1,393 a year but this will increase to an average of £1,703 from 1 November – a hike of more than a fifth.
It means that those who potentially switched to an SVT at an alternative supplier using the £1,277 cap could typically save 25 per cent.
Nigel Pocklington, chief executive of Good Energy, said: ‘Good Energy was given exemption from the price cap because we genuinely and directly support renewable generation and crucially, because our customers choose us for that reason.
‘Not all customers are motivated solely by price, in fact the industry’s focus on driving prices down to the exclusion of all else is a major cause of the supplier failures we’re seeing today and in recent years.
‘Many customers want to know their power comes from real renewable generators and is helping make the UK greener. Doing business that way does come with extra costs, but Good Energy remains competitive despite being the greenest supplier on the market.’
For Ecotricity, it is their Green Electricity, Green Electricity+EV and Green Gas plans.
Ecotricity has 200,000 customers. This is Money has attempted to contact the firm but at time of publication, it had not yet confirmed the current prices of these plans – but if it goes the same way as Good Energy, households face steep bill hikes.
For all electric deals, from all suppliers, this includes both single and multi-rate plans.
For Green Energy UK customers, there are several tariffs are the ones that could see an increase in cost.
These include both the Sparkling Electric and Sparkling Gas tariffs, the Still Electric and Still Gas offerings and, finally, the Tide Electric and Tide Gas deals.
Green Energy UK has fewer than 50,000 customers but has stuck to the price cap of £1,277, despite not needing to.
A spokesperson said: ‘We want to reiterate that it’s been business as usual for GEUK during the current hiatus in the market, as we had proactively hedged forward to mitigate the market risks.
‘We are getting on with things, including registering new customers who have decided to switch to GEUK. It also helps that we have been in business for 20 years.
‘Adopting a prudent business model, rather than joining the race to be the cheapest supplier, has served us well.
‘Whilst GEUK has a derogation from the price cap, the company has never utilised it and while we have some customers on an SVT, they are charged in line with the Price Cap, which has been the case throughout the whole period.’
Due to the ongoing energy crisis, prices are rocketing for all suppliers and many customers
Why has Ofgem put these derogations in place?
Chosen by Ofgem, these derogations are applied to specific tariffs only and not to a supplier on the whole.
The guidance for requesting a derogation relies on the suppliers tariff to demonstrate three outcomes.
The first outcome is that a tariff is an SVT that consumers have chosen to be on.
Secondly, by consumers being on the tariff, support is given to generation and production of renewable energy to an extent that is greater than that which is brought about as result of subsidies, obligations or other mandatory mechanisms.
Essentially, it has to be producing more green energy than is compulsory to do so.
Finally, the cost to the provider of supplying electricity/gas for the tariff is greater than the level of the price cap for reasons that are directly attributable to the support that the tariff provides to renewable energy.
Whilst there is no cap on the price of these tariffs, the regulator said it assesses each derogation to ensure the additional costs are justified.
Why could this now be a problem?
Due to the ongoing energy crisis, which is explained below, prices are now rocketing for all suppliers and many customers.
Those looking for a new fixed plan will have noticed costs are now hundreds of pounds above what they used to be.
Similarly, whilst most on default tariffs will be able to take advantage of the price cap limiting how much they pay, those on these special tariffs will not be protected and could see their bills increase by hundreds of pounds.
This is because wholesale gas prices have increased for suppliers, who are then passing on the costs to their customers.
Customers on one of the tariffs with a higher price cap limit can move to another provider
What is the energy crisis causing prices to increase?
The crisis has been sparked by a number of factors but ultimately is due to the lack of natural gas being produced as well as an increase in demand.
Demand has rebounded quicker than expected after the global pandemic but reserves have been slow to refill over this summer with supply from Russia less than predicted.
There has also been a lower output from renewable sources such as solar power and wind, creating more reliance on gas.
Last years winter (2020 to 2021) was also colder than expected meaning more stocks were used.
Can customers move?
Customers on these plans may want to move provider, or tariff, if the prices increase too rapidly.
Any customer on a default tariff can move at anytime as they are not on a fixed plan.
They can move to a capped default tariff offered by their supplier or other suppliers, subject to any exit fees or contractual arrangements.
Alternatively, they could look for a fixed deal, however, these are much pricier than the price cap at the moment.