When you’re thinking about your household budget for the year ahead, be sure to factor in an energy price rise. Energy regulator Ofgem has warned of energy price rises for millions of people in the UK this April.
According to Ofgem, the price cap for default domestic energy tariffs will go up in April to cover the extra costs faced by suppliers. It means that the typical combined gas and electricity customer will pay an additional £96 a year, with their bill rising to £1,138.
The higher domestic energy bills will come along at a time when household finances are due to be squeezed, with government financial support packages coming to an end.
Driving the higher energy prices is rising wholesale costs, but the price cap means households will be protected from the full extent of these higher costs, saving around £100 a year..
It’s also possible to switch to a more competitive tariff or to a new energy provider in order to save money.
Jonathan Brearley, chief executive of Ofgem, said:
“Energy bill increases are never welcome, especially as many households are struggling with the impact of the pandemic. We have carefully scrutinised these changes to ensure that customers only pay a fair price for their energy.
“As the UK still faces challenges around Covid-19, during this exceptional time I expect suppliers to set their prices competitively, treat all customers fairly and ensure that any household in financial distress is given access to the support they need.”
According to Ofgem, it is better to see energy prices go up in the Spring, when households use less gas and electricity, than wait until the Autumn when demand for energy is higher.
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”.
“Our research estimates that consumers that have relied on the cap to keep their bills down will have paid £613 more than those who have switched once a year since the cap’s introduction in January 2019.
“Our message to billpayers is clear: if you’ve been with your supplier for a while, it’s likely you’re overpaying so shop around for a better deal.”