From Thursday 1 April, fifteen million households will see their energy bills increase by almost £100 a year, after it was announced suppliers can pass on the rising cost of gas and electricity to customers.
Energy regulator the Office of Gas and Electricity Markets (Ofgem) declared in February that its price cap for the 11 million British households that are on their supplier’s default tariff could rise by £96 to £1,138 from 1 April.
A further four million households with pre-payment meters could see their bills jump by £87 to £1,156.
Companies have struggled to get some households to pay their bills during the Covid crisis, so Ofgem decided it needed to allow them to spread that cost across the country.
The rise comes as unemployment hit 1.7 million in January and 4.7 million people are on furlough.
How will the rise affect people?
Ofgem’s decision followed an additional £23 rise that energy suppliers have been allowed to charge customers for bad debt.
The latest increase – Ofgem reviews and changes the price cap once every six months – more than wipes out the gains that consumers made in October, when the price cap dropped by £84 to a record low since the policy was introduced in January 2019.
Citizens Advice acting chief executive Alistair Cromwell said at the time of the announcement, that the increase would be “a heavy blow to a lot of households.”
“With a tough jobs market and essential bills rising, now is not the time for the Government to cut this vital lifeline”.
The £1,138 annual cap is calculated based on the usage of an average household. Energy suppliers are required to price below that cap, with most setting prices just a couple of pounds under.
Emma Pinchbeck, the chief executive of Energy UK, a trade body for energy suppliers, said that the price cap is set in a way that is meant to be fair for both customers and suppliers.
“Today’s rise reflects that the cost of buying energy – by far the biggest part of the bill – has risen significantly over the last few months. It also includes a greater allowance for debt given the difficulties many customers are facing in paying bills at present,” she said.
Ofgem said at the time it had “carefully scrutinised” the changes “to ensure that customers only pay a fair price for their energy”, but conceded that “energy bill increases are never welcome, especially as many households are struggling with the impact of the pandemic.”
How can I beat the rise?
Consumers have been urged to shop around for the cheapest deal since the increase was announced.
MrCromwell said: “With the rise in the energy price cap, many will have to pay more and rightly expect a decent service. Suppliers must step up to give their customers what they deserve.
“Everyone should consider whether they are getting value for money from their supplier – paying more doesn’t always mean you will receive a better service. Don’t put up with it if it’s not good enough. Shop around if you can.”
Ofgem too has suggested customers 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,” said the regulator’s chief executive, Jonathan Brearley.
Additional reporting by Press Association