MILLIONS of people will see their bills rise by £500 a year in April even though the price cap is falling.
Today, Ofgem announced that the energy price cap will fall to £3,280 from £4,279 as wholesale prices drop.
1
However, customers will still see a rise in their bills within weeks roughly by about £500 as there is a cap set by the government instead.
Bills are set to rise from £2,500 to £3,000, under the Energy Price Guarantee introduced last year.
Jonathan Brearley, chief executive at Ofgem said: “Although wholesale prices have fallen, the price cap has not yet fallen below the planned level of the Energy Price Guarantee.
“This means, that on current policy, bills will rise again in April.
“I know that, for many households this news will be deeply concerning.”
He also said that while today’s announcement won’t make an immediate difference to consumers, it’s a sign that some of the pressure the energy markets has seen may be starting to ease.
The energy boss said: “If the reduction in wholesale prices we’re currently seeing continues, the signs are positive that the price cap will fall again in the summer, potentially bringing bills significantly lower.”
But they are “unlikely” to fall back to the levels seen before the energy crisis, he added.
Most read in Money
Millions of Brits still face a struggle with bills and Mr Brearley urged people to contact their supplier for help.
He also indicated that social tariffs for the most hard-up households could be an option.
He said: “We also think that, with bills continuing to be so high, there is a case for examining with urgency the feasibility of a social tariff for customers in the most vulnerable situations.”
Dame Clare Moriarty, chief executive at Citizen’s Advice, told BBC Radio 4’s Today Programme: “For most people, on average, we’re going to see a £900 increase in people’s bills.
“Now we know that that’s going to be unsustainable for very many people. We estimate that the number of people who simply won’t be able to afford their energy bills will double.
“So we’ll go from one in 10 people to one in five people. That is a huge number of people.
“That’s why we’re saying that the Government has to keep the energy price guarantee where it is at the moment – £2,500.”
Sun Money called for a ban on fitting prepayment meters in households in August last year.
Estimates suggest that over four million households already face paying around £60 more for energy just because they have one installed.
What is the energy price cap?
The price cap on energy bills was introduced in January 2019 as a way to ensure that households are not ripped off by their energy suppliers.
It used to be that twice a year Ofgem set the maximum price that households on their supplier’s default tariff would have to pay for every unit of gas and electricity they used for the next six months.
But the energy regulator announced a major shake-up in August, stating that the price cap would change every three months.
It affects roughly 22million people on default or standard tariffs offered by the country’s energy providers, according to Ofgem estimations.
The cap on standard variable and default tariffs is set by Ofgem.
The previous energy price cap meant that the average annual household bill was £1,971 a year.
It was supposed to hike to £3,549 a year in October.
To stop bills from spiralling, the then-PM, Liz Truss, replaced the cap with the Energy Price Guarantee, which rolled out from October 1.
It froze bills at £2,500 a year on average.
It was supposed to be in place for two years, but after the fallout from the mini-Budget and concerns over rising government debt, Chancellor Jeremy Hunt said the guarantee would only last until April.
The £2,500 figure is an average bill a household might pay.
You could pay more if you use more energy – or less than this if you use less energy.
Right now, the current rates for duel fuel tariffs include 10p per kilowatt hour (p/kWh) for gas and 34p/kWh for electricity.
What other energy bill help is available?
As part of the Autumn Statement, it was revealed millions on benefits and Universal Credit will receive an extra one-off payment of £900.
Struggling families are also eligible for the Warm House Discount to help them tackle the cost of living.
The scheme is where eligible households can get £150 off their electricity bill each winter – but you’ll have to wait until the colder months to get the discount.
Households in England and Wales don’t need to apply to get the cash and they’ll automatically qualify if they are receiving certain benefits.
You can read more about who’s eligible in our guide.
There are also plenty of energy grants and schemes open to help you out if you’re struggling:
- British Gas Energy Trust Individuals and Family Fund
- British Gas Energy Trust
- EDF Customer Support Fund
- E.ON and E.ON Next Grants
- Octopus Energy Assist Fund
- OVO Energy
- Scottish Power Hardship Fund
There’s also a one-off fuel voucher from your energy supplier if you’re on a prepayment meter.
Do you have a money problem that needs sorting? Get in touch by emailing [email protected]
