Consumer regulator Ofgem has announced that the price cap on energy will increase on 1 April 2021 due to rising wholesale costs and growth in demand.
This means that a typical household on a default energy tariff could expect a bill increase of £96 per year.
This could affect around 11 million homes in England, Wales, and Scotland (Northern Ireland sets its own cap).
The cap for prepayment meter customers will increase by £87 per year, affecting around 4 million households.
CAUSE FOR CONCERN
Rising energy prices are not welcomed, especially when the UK is still gripped by a pandemic, which has squeezed household incomes.
Citizen’s Advice estimated that 2.1 million households are behind on their energy bill payments.
The timing of the price hike would coincide with the universal credit £20 a month increase coming to an end.
Adam Scorer, Chief Executive of fuel poverty charity National Energy Action (NEA) said,
“People on the lowest incomes and in the worst housing are always hit hardest. If bills rise by around £100, millions of households have two stark choices; stay cold or fall further into debt”.
WHAT IS THE PRICE CAP?
The energy price cap sets a limit on the rate that energy suppliers can charge per Kilowatt (KWh) of electricity and gas (the unit rate) for domestic customers on a standard variable, or default, energy tariff.
It is reviewed twice a year, in April and October.
It does not apply to fixed rate tariffs, which are often cheaper.
Therefore, it is important for customers to shop around for the best energy deal.
WHAT CAN CUSTOMERS DO?
There are ways for customers to save. Money Saving Expert (MSE) founder, Martin Lewis has urged people to urgently compare energy prices.
He said, “Hopefully, it will shock people into action”.
A whole market search comparison site like MSE ‘Cheap Energy Club’ can save customers up to £200 if they switch deals. Comparison sites also underestimate savings until the hike comes into force.
Other simple changes such as wearing layers and turning the thermostat down, turning lights and plug sockets off when not in use, not leaving hot water running, and bleeding radiators to help hot air circulate can all reduce energy consumption.
Using energy efficient household appliances where possible can also help. An A+++ energy star rated fridge can use up to £320 less electricity than an A+ fridge during its lifespan.
For help with energy costs visit https://www.citizensadvice.org.uk/