Ofgem is investigating breaches of its regulations after social care providers reported energy cost increases as high as 500%.
The UK’s energy regulator has found “evidence of significant concern” about energy pricing for non-domestic customers according to Care England.
Ofgem has also raised concerns about the breaches in regulation with Chancellor Jeremy Hunt, saying its investigation is focusing on four issues:
• Deemed contract rates being higher than explained by market conditions (A deemed rate contract is put in place when you use energy without having negotiated a deal with your supplier)
• Significantly higher security deposits
• Increased standing charges and risk premiums
• Non-compliance with the energy bill relief scheme (EBRS).
In its letter to Mr Hunt, Ofgem said it was also concerned by issues it does not have legal powers to intervene on, including contracts signed last autumn that are now significantly more expensive than what current wholesale market conditions would deliver.
Ofgem’s supply licence stipulates that energy companies must ensure that the terms of any deals for customers not on long-term contracts are “not unduly onerous”.
It comes at a time of crisis for the care sector, with a third of care providers saying they have considered shutting down in the last 12 months.
Around half of energy suppliers appear to be charging deemed rates that are much higher than can be explained by market conditions, according to energy consultancy Box Power CIC.
Nearly one in ten care providers have also either not received the EBRS discount or had the discount misapplied on their bills.
Professor Martin Green OBE, chief executive of Care England, said the sector has been “in the eye of the storm” of “financially crippling” electricity and gas price increases.
“As energy costs, security deposits and risk premia have increased, so has the care sector’s financial instability,” he said.
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“Energy pricing follows the rocket and feather approach experiencing a rapid increase as wholesale energy rises, but a slow decline as it reduces by some energy suppliers, who continue to profit as a result.
“There can be no justification for energy suppliers charging unduly onerous financially crippling rates to care providers,” he continued.
“What we now need to see is an immediate resolution to how energy transactions and contracts are regulated and to ensure a fairer approach is continually monitored by the regulator.”