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07 February 2019 08:30

Energy prices to rise for millions as Ofgem increases cap

what is the energy price cap

"As Ofgem has said, these increases reflect the sharp rise in gas and electricity costs. The key thing is that as a result of the cap, 11 million households on standard variable tariffs will be £75 to £100 better off and energy suppliers will no longer be able to rip off customers on poor value tariffs." "With over 60 companies and more than 200 tariffs to choose from, consumers can always shop around for a cheaper deal and make big savings by switching." More than half of British households are set to see an increase in the cost of energy in April after the regulator, Ofgem, raised price caps. Ofgem sets maximum prices that can be charged for gas and electricity to those who have not switched suppliers and are on default tariffs. "We can assure these customers that they remain protected from being overcharged for their energy and that these increases are only due to actual rises in energy costs, rather than excess charges from supplier profiteering," said Dermot Nolan, chief executive of Ofgem. The price cap will rise on their tariffs too, with the typical customer paying £1,242 per year, up by £106 from the previous cap level.

price cap

Ofgem sets a cap on the unit price of energy for electricity and gas, and a maximum standing charge. Ofgem said this price limit meant households typically saved £76 a year on what they would have been charged without the cap. Prices are rising because Ofgem is allowing suppliers to charge more to cover the higher wholesale costs they face owing to the higher global price of oil. The regulator considered the costs faced by suppliers in the six months to the end of January when setting the new cap for April. Alex Neill, from consumer group Which?, said: "This eye-watering increase to the price cap will be a shock to the system for people who thought that it would protect them from rising bills." But Lawrence Slade, chief executive of Energy UK, which represents suppliers, said that energy companies were facing "drastically rising costs" which were outside their direct control so it was correct for Ofgem to reflect that when setting the cap.

ofgem price cap

Its analysis suggests that default tariff customers could be paying around £75 to £100 a year more on average for their energy had the default tariff cap not been introduced, despite the increase just announced. Ofgem and consumer groups say switching could save a typical household £200 a year, although this differential has narrowed from about £300, partly as a result of price bunching after the cap was introduced. Energy Minister Claire Perry said: "We were clear when we introduced the cap that prices can go up but also down." She added that energy suppliers were "no longer able to rip off customers on poor value tariffs". But Labour's shadow business secretary, Rebecca Long Bailey, said: "This government is resting on its laurels while big energy companies are ripping off their customers." The price cap for households on default energy tariffs will rise again on April 1, Ofgem has confirmed. The caps, Ofgem said, will continue to ensure that 15 million households pay a fair price for their energy - it said the increase reflect a genuine increase in underlying energy costs rather than supplier profiteering.

ofgem phone number

The energy price cap was first teased by prime minister Theresa May in 2017 as part of a pledge to save households on some of the priciest tariffs an average of £100 a year. When it kicked in last month, suppliers were forced to scrap excess charges of £76 a year on average per default tariff to ensure customers weren't being ripped off by the market. According to Ofgem, default tariff customers would be paying around £75 to £100 a year more on average for their energy had the default tariff cap not been introduced. Speaking on its decision to increase the cap - including for prepayment customers - it said £74 of the £117 increase is due to higher wholesale energy costs. Ofgem adjusts the level of the caps twice a year to reflect the estimated costs of supplying electricity and gas to homes for the next six-month period.

ofgem future energy

Around 15 million households will see their energy prices rise after regulator Ofgem hiked price caps designed to protect those on poor value deals. It insisted those affected will still pay a "fair price" for their energy as the increase reflects a genuine increase in underlying wholesale costs, rather than provider profiteering. Dermot Nolan, chief executive of Ofgem, said: "Under the caps, households on default tariffs are protected and will always pay a fair price for their energy, even though the levels will increase from April 1. "We can assure these customers that they remain protected from being overcharged for their energy and that these increases are only due to actual rises in energy costs, rather than excess charges from supplier profiteering." The regulator said around £74 of the £117 increase in the default price cap was down to higher wholesale energy costs, which make up over a third – or £521 – of the overall cap. Wholesale costs have risen by 17% since the cap was set, said Ofgem, Ofgem added that customers on default deals could save more money by switching to a better deal.

ofgem energy price cap

But Gillian Guy, chief executive of Citizens Advice, said: "As unwelcome as this news is, it's likely that prices would be higher still without the cap and there are steps people can take to ease the strain on their bills. Around 15 million households will see rates rise after changes to the price caps designed to protect those on poor value deals. The energy watchdog said it will increase the price cap for default and standard variable gas and electricity tariffs by £117 to £1,254 a year from April 1 due to hikes in wholesale costs. Ofgem said the price cap for pre-payment meter customers will also increase – by £106 to £1,242 a year from April 1. It insisted those affected will still pay a "fair price" for their energy as the increase reflects a genuine increase in underlying wholesale costs, rather than provider profiteering.

free battle

It said even after the April increase, those on default deals - including standard variable tariffs (SVTs) - will still be saving around £75 to £100 a year on average thanks to the price cap, which was introduced in January. Ofgem will review the level of the cap again in August for the six-month winter price cap period, which comes into force on October 1. MILLIONS of household will see their energy bills increase by over £100 each year as Ofgem increases the price it lets suppliers charge for energy. The regulator said this morning it will increase the government's energy price cap, which was meant to save customers from rip off deals, by £117. GETTY - CONTRIBUTOR 1 Energy bills will rise by £117 a year for millions of households from April 1 About 11 million households are on default, or standard variable tariffs, and are set to be affected when the new price cap into force on April. The price cap will also affect those on prepayment meters - around four million people - with the typical customer paying £1,242 per year, up by £106 from the previous cap level. Around £74 of the £117 increase in the default tariff cap is due to higher wholesale energy costs for suppliers, which makes up over a third (£521) of the overall cap, Ofgem said. Higher wholesale energy costs have also pushed up the level of the pre-payment meter cap. The price cap increase has been slammed by consumer groups as it wipes out the yearly savings of £76 that households were promised when the price cap came into force in January. Stephen Murray, energy expert at MoneySuperMarket, said: "Today's £117 rise is even higher than the large increase that was widely predicted over the last few weeks, and it deals an even more significant blow to millions of households who were relying on the cap to save them money. Dermot Nolan, chief executive of Ofgem, said: "Under the caps, households on default tariffs are protected and will always pay a fair price for their energy, even though the levels will increase from 1 April. "We can assure these customers that they remain protected from being overcharged for their energy and that these increases are only due to actual rises in energy costs, rather than excess charges from supplier profiteering.