Energy bills soaring despite price cap
The average price hike in 2019 stands at £110, compared to an average rise of £75 in 2018, according to auto-switching service Look After My Bills.
This time last year there had only been 15 price rises, increasing to 57 by the end of 2018.
Look After My Bills’ research calls into question the effectiveness of the energy price cap and whether it has inadvertently led to more price rises.
The price cap was introduced to protect consumers from being overcharged. It came into force on 1 January 2019 and sets the maximum rate energy providers can charge customers on standard variable or default tariffs.
According to Look After My Bills, 22 suppliers’ prices are within £10 of the £1,254 cap, adding billions to people’s bills. The cap is about £400 more expensive than the cheapest deal on the market.
Lily Green, head of research at Look After My Bills, said: “It’s too early to tell but it’s possible that – in a perverse twist of fate – the price cap may have opened the door to price rises. Too many suppliers are seeing the cap as a target and taking the opportunity to push prices up.
“What is particularly baffling is that wholesale energy costs are in fact going down. You would expect energy bills to do the same.”
What is a standard variable or default tariff?
All energy suppliers have a standard variable, default or ‘evergreen’ tariff. This is the tariff you’ll be switched to if you don’t take action when a fixed-term deal comes to an end.
Suppliers can hike prices on standard tariffs whenever they choose – as long as typical bills don’t exceed the price cap. However, it’s free to switch away from a standard variable tariff as they don’t have exit fees.
In most cases, households will be better off switching to a dual fuel tariff run online and paid by monthly direct debit. Deals change frequently but the ‘big six’ (British Gas, E.ON, Npower, Scottish Power, Scottish & Southern and EDF Energy) tend to be more expensive than smaller brands.