Energy price cap hike to add £1bn to bills
The regulator Ofgem will announce an increase to the cap on Thursday, with some predicting it could go up by £100 or more.
The cap, which only came into force on 1 January, sets the maximum rate energy providers can charge customers on standard variable or default tariffs. It’s currently set at £1,137, meaning a typical customer won’t pay more than this a year on average.
Ofgem said the average family would save £76 a year.
But the cap is updated every April and October to take into account the varying costs of wholesale energy.
And with 11 million households currently on a standard variable or default tariff, a £100 hike to the cap would collectively add £1.1bn to bills, according to analysis by automatic energy switching firm Look After My Bills.
Another auto-switching firm, Weflip, said the price cap will deliver one of the “single biggest energy price increases” the market has seen in years.
Weflip’s head of energy, Sally Jacques, said: “This is the first test for the new price cap and more importantly for providers. Before the cap was introduced, the big six [energy suppliers] competed on price, with their standard variable tariffs varying by around £50 to £100 a year. We are now likely to see them all rise, as one, to the level of the cap.”
She added: “To be fair, the cap review will only be reflecting wholesale price movements, and these increases would probably have been passed on to consumers by their providers this year anyway. But a huge increase would be the worst possible start for the cap. It will do little to convince consumers that the cap is making a big difference.”
How to beat the hike
Families on standard variable tariffs are encouraged to shop around for a better deal.
Stephen Murray, energy expert at MoneySuperMarket, said: “People who choose to stay on a standard variable tariff are being penalised for being loyal to their energy provider and not switching. It is, however, an easy situation to fix and the message is clear – take control of your bills and don’t let the regulator determine how much you’re paying.
“Go online today and switch to a competitive tariff – it takes five minutes and you could save £200 on your bills. That’s a fifth of what most people are paying at the moment, so it’s worth the effort!”