Brace yourself for £1.7bn energy bill shock set to hit the nation
On 1 April, £1.67bn will be added to the nation’s energy bill as a result of regulator Ofgem’s decision to raise the energy price cap, according to uSwitch.
The cap, which only came into force on 1 January, sets the maximum rate that energy providers can charge customers on standard variable or default tariffs. From 1 April, the cap on standard variable tariffs (SVTs) will rise to £1,254 per year.
This means that over 11 million energy customers on standard credit meter tariffs face an average bill hike of £117 a year, while a further 3.6 million customers with pre-payment meters could be in line for an average increase of £106.
Ahead of the price cap rise, 36 suppliers have raised prices by more than 10% on average.
uSwitch warns that large families in socially-rented houses who are affected by the cap will pay an extra £127 per year on average. This equates to 5.7% of an assumed annual income for the household of £24,000.
For households in northern Scotland who are signed up with Scottish Hydro, the increase will be even steeper – with an average rise of up to £147 a year, pushing their annual bill above £1,700. This would account for 7.3% of an average total income of £23,000.
How the price cap will affect the regions
The table below outlines the impact across different parts of the UK:
Source: uSwitch correct as of 21/03/19
Households on benefits
The situation for households on benefits, who are on standard variable or default tariffs, also looks bleak, according to uSwitch’s analysis. This is because more of their income will be swallowed up by gas and electricity bills.
Nationwide, the average bill increase for single people or young families on benefits is estimated at £114, accounting for 6.5% of an assumed £19,000 annual income.
Meanwhile in southern Wales, bills for Swalec energy customers could rise by £127 to £1,339 per year. According to uSwitch, this could mean that energy costs equate to 8.4% of their £16,000 budget.
Energy consumers in London will face the biggest bill hike of £203, taking energy prices to £1,977 a year. However, this would only account for 2.2% of an assumed annual household income of £87,000.
uSwitch also pointed out that pensioners in some parts of the country have the potential to spend almost 5% of their retirement income on gas and electricity from 1 April. Households in northern Scotland will be hit the hardest hit in this demographic group, with standard tariffs rising by more than £130 a year to £1,558.
For young families in low cost, privately rented accommodation around the country, uSwitch estimates that the price cap will result in an average increase of £102 per year.
In Merseyside and north Wales, it will be even higher – with an average bill increase of £123, leaving those households with a total bill of £1,198 a year. This represents 4.6% of the £26,000 assumed annual income.
Ofgem pointed out that the price cap has been set up to ensure that consumers are not overcharged for their energy.
“Any increases in the level are only due to actual rises in energy costs, rather than excess charges from supplier profiteering.
“The cap has significantly reduced consumers’ bills. Our analysis suggests that on average consumers are paying around £75-100 per year less than they would be if the cap was not in place. Households who use more energy, such as large families, are saving even more,” the regulator explained.
Time to switch?
Rik Smith, energy expert at uSwitch, commented: “This may seem like a cruel April fools joke, but it’s no laughing matter. The stark reality is that the very cap that was supposed to protect customers on poor value standard tariffs is now responsible for some of the harshest price increases in recent memory.”
Smith points out that consumers have a few days left before their energy bills soar. As it is becoming cheaper for energy suppliers to buy gas and electricity on the open market, he says there are now lots more cheap deals below £1000 a year available.
“It is vital that households are not lulled into a false sense of security by the idea of a price cap. You can switch to a much cheaper rate in minutes and save over £300 compared to staying on a standard plan that’s priced right up to the level of the cap.”
The providers offering the best deals
For anyone who is considering switching, here is a table of the best tariffs currently on offer across the market:
Source: uSwitch.com correct as of 25/03/19 – assumes households with medium annual consumption on a dial fuel-tariff paying by monthly direct debit