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Millions of households should brace for £90 energy bill hike

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26/01/2021
The energy price cap for customers on expensive default tariffs is predicted to rise in April, adding £90 to the average household bill.

The energy price cap is a limit on how much suppliers can charge for each unit of gas and electricity for standard variable (default) tariffs and pre-payment (safeguard tariff) meters.

While it sets a maximum price that suppliers can charge, this shouldn’t be confused with the maximum bill customers face as this depends on how much energy is used and where they live.

The cap is set by energy regulator, Ofgem, and is reviewed twice a year with the cap changes coming into effect in April and October.

The default price cap was lowered to £1,042 a year in October while the prepayment energy cap was also lowered from £1,164 to £1,070 a year.

However, price comparison site MoneySuperMarket predicts the energy price cap is set to rise by an average of £80 – £90, hiking bills for around 11 million households.

It said this is off the back of rising wholesale gas and electricity prices but said customers should look to switch to save money ahead of the price cap change.

‘Doing nothing costs money’

MoneySuperMarket’s energy expert, Stephen Murray, said: “We expect the energy price cap to go up increasing bills for around 11 million households by on average £80 – £90. This means those customers who are on a standard variable or default tariff will almost certainly see an increase in their bills from April.

“The price cap was planned to save customers around £1bn a year by ensuring a ‘fair price’ for households who didn’t switch. However, customers who have relied on that ‘fair price’ since 1 January 2019 (when the price cap was introduced) will have paid £610 more than customers who have switched once a year since that date.

“Staying with your supplier for too long without switching means you are highly likely to be paying more than you need to. When it comes to energy bills, doing nothing costs you money. For those customers who haven’t switched supplier in the last 12 months a quick online comparison could save you £306.38 even before the price cap increase.”

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