Energy price cap to increase by £693 from April

‘The energy price cap will increase from 1 April for approximately 22 million customers. Those on default tariffs paying by direct debit will see an increase of £693 from £1,277 to £1,971 per year (difference due to rounding). Prepayment customers will see an increase of £708 from £1,309 to £2, 017,’ says Ofgem.

The increase is driven by the rise in the global gas prices over the last 6 months and will affect the default tariff customers who haven’t switched to a fixed deal and those remain with their supplier after their previous supplier left the market. The price cap is updated and tracked twice a year, specifically for energy and other costs. The cap stops energy companies from making excessive profits, which helps customers pay no more than a fair price for their energy.

However, when the price cap increases, it gives the companies the liberty of raising prices for all customers. Jonathan Brearly, chief executive of Ofgem, said: ‘“We know this rise will be extremely worrying for many people, especially those who are struggling to make ends meet, and Ofgem will ensure energy companies support their customers in any way they can. Ofgem is working to stabilize the market and over the longer term to diversify our sources of energy which will help protect customers from similar price shocks in the future. ”

The chancellor, Rishi Sunak, responded by announcing a plan to ease the pressure on households, with £350 of support, which includes £200 off their household’s energy bills. However there will be a repayment plan, over five years, from next year – and a £150 discount off council tax. Among those affected by the price cap hike will be former customers of the 29 energy suppliers that have collapsed in the wake of the wholesale gas price surge, affecting a total 4.3 million domestic users.

How bad is this for consumers?

Scott Byrom, chief executive of The Energy Shop, said today’s announcement of energy price increases was “higher than was expected”. He told Sky News that the 54% energy bill rise is “a staggering amount”. “It’s a record. It’s the biggest increase I’ve seen. The biggest concern here is when we had a 35% price rise in July 2008, the message was to switch and even say customers could reduce their energy bills by hundreds of pounds, and that’s just not an option right now.” Mr. Byrom said that unfortunately for consumers, “this is a pill we need to swallow whole, as hard as that is”.

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