Energy Bills Rise by £100: How to Beat the Price Cap

Gas flame

Today's energy price cap increase is no April Fools. UK households could see gas and electricity bills soar by an average of almost £100 per year for around 15 million households. We take a look at the latest price rise and explain what you can do to ensure you’re getting the fairest energy deal.

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What is the latest energy price cap increase?

Ofgem is raising the energy price cap as of 1 April 2021 and which means energy prices return to pre-pandemic levels for some. Even though, the pandemic is not over and social distancing measures are still in effect, Ofgem is going ahead and raising the energy price ceiling to allow energy companies to hike up their pricing

Annual bills are set to increase by an average £96 to £1,138 for 11 million customers on a standard dual-fuel energy tariff.

Meanwhile, four million prepayment users are set to see an average rise of £87 to £1,156 a year. These are not insignificant energy cap increases and we can be sure that energy suppliers will fully take advantage of it to hike up UK household energy bills.

How does the energy price cap work?

Magnifying glass insepecting energy price cap changes

The energy price cap was first introduced by Ofgem in January 2019 and puts a limit on how much energy suppliers can charge for each unit - or kilowatt-hour (kWh) - of gas and electricity used. It also sets a maximum daily standing charge to keep customers connected to the grid.

The price cap applies to both prepayment customers and those on standard variable tariffs - usually those who have either never switched energy provider or have come to the end of their fixed-term deal.

Many people wrongly assume that if they’re already protected by the price cap, they won’t find a better deal by switching energy supplier. However, this is simply not the case, as the cap is reviewed every six months and can change drastically, as we are seeing with the latest rise.

In fact, even with the price cap applied, customers on standard variable tariffs could be paying an average £150 more than those on the cheapest fixed deal.

What was energy price cap before April 1st?

The current energy price cap came into force in October 2020 and was set at its lowest level yet, at £1,042 a year. This was due to record low wholesale energy prices during the first national lockdown as demand for gas and electricity plummeted with the closing of offices, factories, pubs and restaurants.

Why is Ofgem increasing the cap now?

The energy regulator has claimed that the latest price cap increase is down to recovered energy demand following the end of the first COVID-19 lockdown, which has led to a surge in wholesale energy prices once again. While that rationale explains the market forces behind the energy price cap, it ignores the plight of UK households who need electricity and gas as a daily necessity.

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.

“The price cap offers a safety net against poor pricing practices, saving customers up to £100 a year, but if they want to avoid the increase in April they should shop around for a cheaper deal.

“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.

“The government and Ofgem have been working with the energy industry and consumer groups to support customers through this difficult time and I urge anyone worried about paying their energy bills to contact their supplier and access the help available.”

How to beat the energy price cap

Ofgem’s advice is to shop around for the cheapest deal on your gas and electricity bills. If you haven’t switched provider within the last year, you’re likely already paying far more than you should for your home energy, even before the new price cap comes into effect.

Households on standard variable tariffs or prepayment meters could save an average of around £150 just by switching to a fixed-price tariff.

With the typical household spending more than ever on their energy bills due to home working and lockdown restrictions, there’s never been a better time to get a cheaper deal and stop paying over the odds for your gas and electricity.

What other help is available to pay my bills?

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With the effects of the pandemic still being felt across much of the country, Ofgem has increased its protections for those living in vulnerable circumstances.

Suppliers are now required to provide emergency credit to prepayment customers who are currently struggling to afford to top up. Meanwhile, those who are behind on bills can ask to be put on an affordable repayment plan, with meter disconnections suspended for the time being.

There are also a number of government-backed grants and schemes that have been set up to help those struggling to meet their energy costs, such as the Warm Home Discount, Cold Weather Payment, Winter Fuel Payment and the Energy Company Obligation (ECO). Find out more by visiting Home Energy Schemes.

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