PRICE CAP RISE TO SLAP £100 ON POWER BILLS
TARGET
It argues the cap also encourages firms to pass on savings to consumers. But critics argue it is having the opposite effect.
Within days of announcing the increase, the biggest supplier, British Gas, increased its prices to the new maximum rate.
Big Six rivals Eon and Npower followed suit, with SSE and EDF hiking prices to just £1 below it.
Simona Rutkauskaite, research analyst at website Look After My Bills, said: “Yet again the biggest energy companies are treating the price cap as a target to hit rather than the absolute maximum they should be charging hard-pressed families across the country.”
The energy price cap is based on the ‘wholesale’ price of energy – the basic cost suppliers must pay to get the energy in the first place. When Ofgem reviews the cap, it looks at how wholesale prices are likely to fluctuate over the next six months.
They fell as demand collapsed at the start of the pandemic which is why prices fell last winter.
However, they are expected to return to pre-Covid levels this summer as the country rebounds from the virus crisis.
So as the price cap rise comes into force, 15 million people will see bills rise due to a scheme invented to save them money.
Luckily, there are ways to escape the penalty. Comparison websites and auto-switching tools can protect you from being stuck on standard variable tariffs (SVTs).
Ofgem says households could save £100 by shopping around for a fixed deal. Citizens Advice estimates this saving even higher at £200 a year. The charity also urges households to judge suppliers on more than just price.
Its star rating for customer service ranks Igloo Energy, M&S Energy, Outfox the Market, Octopus Energy and Co-Operative Energy as the top five.
Below, Ofgem chief Jonathan Brearley tells us how and why the energy price cap will affect you.
The biggest factor behind the rise is an increase in wholesale price of electricity and gas suppliers pay.
When wholesale prices fell sharply last year in the wake of the first lockdown, the level of the price cap fell by £84 in October to its lowest yet for the winter period which expires on 1 April.
Demand for energy has since recovered which has pushed wholesale prices up normal levels. to more
The annual bill for someone with typical consumption on a default tariff (SVT) set at the price cap will rise by around £96 to £1,138, and by £87 to £1,156 for prepayment meter users for six months from April 1. Despite the increase, the price cap will continue to save the 15 million households it protects between an estimated £75 and £100 a year.
The prices of fixed deals have already been rising in recent weeks ahead of the price cap increase. That’s because the impact of an increase in wholesale prices usually feeds more quickly into these fixed deals.
We urge all consumers to shop around for a better deal and to access support if you are struggling to pay your bill.
Get in touch with your supplier as soon as possible to access the support available. Under Ofgem rules, suppliers must put those behind on bills on affordable repayment plans.
They also have to provide emergency credit to customers struggling to top up pre-payment meters and should not disconnect customers. There are also a range of government support schemes in place. Under the Warm Home Discount scheme, eligible customers who are in fuel poverty get an annual rebate of £140 on their energy bill.
Payments from £100 to £300 are also available under the Winter Fuel Payment for older people.
Customers should ask their supplier if they are eligible for such schemes as payment is not always automatic. If they do not qualify, suppliers can point to other ways in which they can get help.
Why is the price cap rising in April?
Will it benefit me or will I be worse off?
Why are suppliers putting prices up?
Shop now for a better deal – and there’s support out there if you’re struggling
Households on SVTs can save around £100 by switching. A guide on ofgem.gov.uk includes a list of approved price comparison sites.
Those who would rather not switch should contact their supplier and ask to be moved to a cheaper fixed tariff which should still result in significant savings on their energy bill.
How do I get support?
How can I get a better deal instead?