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Energy bills may rise over £90 a year as Ofgem increases price cap

Suban Abdulla
·3-min read
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Ofgem said that the higher than expected hike was due to the sudden increase in prices in the wholesale energy market. Photo: Getty

Around 15 million UK households will see their energy bills rise more than £90 ($123) after Ofgem lifts the price cap.

The new cap will come into force from 1 April this year. This means that for six months from April, the price cap will increase by £96 to £1,138 for 11 million customers on a standard dual-fuel energy tariff, and by £87 to £1,156 for 4 million prepayment meter users.

The cap doesn’t affect customers who are on fixed tariffs — which are more likely to be better value.

Ofgem said that the higher than expected hike was due to the sudden increase in prices in the wholesale energy market.

When energy prices dropped sharply in 2020 after the first coronavirus lockdown — the price cap dropped by £84 in October to its lowest level yet for the current winter period, the regulator said.

Additionally, for the default tariff price cap level, Ofgem has also allowed energy firms to claim £23, to cover higher levels of customer bad debt with more people being unable to pay their bills due to the impact of COVID-19.

The regulator’s decision to lift the energy price cap for the first time in two years has raised questions.

“Energy bill increases are never welcome, especially as many households are struggling with the impact of the pandemic,” said Jonathan Brearley, the chief executive of Ofgem. “We have carefully scrutinised these changes to ensure that customers only pay a fair price for their energy.”

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The acting chief executive at Citizens Advice, Alistair Cromwell called the increase "a heavy blow to a lot of households” — a move which would come as many Britons face benefits cuts.

Price comparison site, MoneySuperMarket has advised customers to switch to a new fixed tariff and not to rely on the cap to save more.

This goes for customers who are on a standard/default tariff or nearing the end of their fixed deal

Chart: MoneySuperMarket
Chart: MoneySuperMarket

Stephen Murray, energy expert at MoneySuperMarket, said: “Ofgem’s announcement that the price cap will be increasing, will put an average of £96 pounds on the bills of around 11 million households. So, those customers who are sitting on an expensive standard variable rate tariff will certainly see a hike in their bills from April.

“Consumers that rely on the price cap to protect them from price hikes or give them a ‘good deal’ on their energy bills do so in error. The cap was introduced to ensure households that didn’t switch paid a “fair price” for their energy, but unfortunately that fair price has consistently been a long way from a “great price.”

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