Energy bills to rise by £139 a year for millions as price cap soars

Energy bills will rise for millions of households this autumn, with most seeing an increase of £139 a year at a time when many are still facing financial difficulties.

The energy price cap is increasing by £139 to £1,277 for the 11million customers on their suppliers’ default tariff, Ofgem announced today.

Bills will also increase by £153 to £1,309 for 4million pre-payment meter customers.

The increased bills will start from 1 October, and last for the following six months until the cap is reviewed again. 

Energy bills will rise for millions of households with most seeing an increase of £150 a year

The changes are being blamed on a rise in wholesale energy prices, and energy firms trying to recoup costs after customers missed payments during the pandemic.

Ofgem added surging global fossil fuel prices are already driving up inflation for consumers, making fixed rate energy tariffs not covered by the price cap, as well as petrol and diesel more expensive. 

The price cap was already standing at £1,138, after rising by £96 a year in April.

This is Money previously reported that the price level was likely to soar by as much as £150 at the next review, according to energy experts at Energy Helpline, due to a rise in energy costs. 

The cap was launched in 2019 to stop providers charging rip-off prices to households that do not switch every year.

It is reviewed twice a year to reflect the costs of supplying electricity and gas for suppliers.

However, many suppliers price their tariffs right up to the limit and have been accused of treating the cap as a target. 

The hike will come as a significant blow to many, as energy prices reach their highest level in years.

In fact, suppliers have upped the cheapest energy deals by £180 in a year, research from Compare the Market found.

As a result, customers on pricey default tariffs and those who think they are paying too much are encouraged to use price comparison sites to see if they could save by switching or moving to a fixed deal. 

The hike will come as a significant blow to many as energy prices reach highest level in years

These are typically much better value that the default options as the prices are frozen and cannot rise for the length of the contract. 

Customers could pay nearly £250 less than the new £1,277 cap per year,  if they switched to one of the top ten best-buy deals (see below). 

Justina Miltienyte, energy policy expert at Uswitch, said: ‘The price cap rise is the ultimate triple blow for homes across the country. 

‘Not only is it the first time Ofgem has raised the cap twice in a year, it’s also the first time the cap has gone up before winter and the highest increase since the cap was first introduced back in 2019.

‘This should be a real wake up call to consumers that the price cap will not protect them from skyrocketing bills.

‘Unfortunately, the writing was on the wall for the cap to go up again, following the continued rise of wholesale prices this year. Prices collapsed in 2020 due to low demand during lockdown, but energy usage has dramatically bounced back.

‘Households on standard variable tariffs have faced continued uncertainty over bills, with prices rising and falling as the price cap pendulum has swung to and fro every six months. But this time, it’s less of a pendulum and more of a pummelling.’  

Whilst many energy experts have criticised the price cap for hiking bills for millions, other firms have praised Ofgem for its introduction, saying that without it some customers would be paying bills hundreds of pounds higher. 

Greg Jackson, CEO and founder of Octopus Energy, said: ‘The price cap is the single most effective intervention for energy customers. 

‘It’s like the minimum wage – it guarantees a level of decency for everyone, but of course they can still do better if they shop around. 

‘Global gas prices have tripled in the last year, so without the price cap, energy prices would be hundreds of pounds higher than they are now. Never has the cap been more vital and it should be made permanent.’ 

The price cap is reviewed twice a year to reflect the costs of supplying energy for suppliers

Best energy deals on the market

This is Money, with help from Uswitch, has compiled the best energy deals currently on the market.

All are fixed deals, as these are usually better value compared to standard default tariffs.  

Challenger supplier, Avro Energy, offers the cheapest deal on its Simple and Flow12M contract.

Customers will be signed up for a year for an average of £1,035.53, with no exit fee.

However, it is not a green tariff – which may be a deal-breaker for homes looking to be more environmentally friendly. 

Utility Point offers the second best deal on its Just Join Up 21 12M Fixed Wk28 tariff. This costs just 14p more than Avro on average, at £1,035.67 a year. 

Whilst there is a £72 exit fee for those looking to leave earlier than the year, it is a green tariff. 

Outfox the Market has the third best value deal on its Fix’d 21 16.0 deal, which typically costs £1,104.57 a year on a 12-month contract. 

Meanwhile, Eon is the only Big Six provider to make the list with its Fix Online v46 deal costing £1,126.18 – the same amount as its new firm Eon Next’s Next Online v6 offering. 

Both are green tariffs, fixed for a year, but those leaving early on Eon’s plan will be charged £60 whilst those on Eon Next’s will not have to pay anything.  

This post first appeared on Dailymail.co.uk