Hi everyone, quick summary: Changing headroom allowance to a fixed £10 per household would save the UK government £2.5bn of spending over the 2 year energy price guarantee scheme.
I'm producing some tables to show the benefits this petition will have if successful, here's the first one and a little explanation as to why headroom allowance is currently a problem.
"Headroom Allowance" is an extra cost added to the price cap to account for any mistakes or inaccuracies in Ofgem's calculations of costs. So it's literally just a little wiggle room for suppliers, it's not necessarily needed if they can manage their costs properly.
It's calculated as 1.46% of all the other costs added together, so as energy costs rise they get more wiggle room.
The current cap gives the domestic energy market over £1bn of headroom in their costs, up from £154m in 2020.
I don't know about you, but I think these massive organisations should be able to manage their costs well enough not to need that £1bn. And if they are managing their costs properly, then most of that £1bn is just extra profit for them... so Ofgem need to change this part of the formula!