Energy prices to rise by at least £139 for millions of households

Household bills will increase for millions of people across the UK in October as energy prices will rise, just as the cold weather starts.

Regulator Ofgem says the default domestic energy deal price cap will rise to cover supplier’s additional costs. The regulating body sets the price cap twice a year, which governs the maximum amount suppliers can charge for each unit of energy used. But overall bills will depend on how much gas and electricity a customer actually uses.

The price cap affects an estimated 11 million households in England, Wales and Scotland. These are people who have never switched suppliers or have discount deals that are expired. This accounts for around half of all the households in the UK. It does not affect those who are on ‘fixed deals’. About four million customers with prepayment meters will also see the effects of the raise.

A typical consumer will likely see gas and electricity bills increase by £139 to £1,277 a year, with prepaying customers seeing an increase of £153 to £1,309.

More help and support needed

Charities are concerned over the timing of the increase. Struggling families are already facing losing an extra £20 a week from Universal Credit in the same month. The director of policy and advocacy at fuel poverty charity National Energy Action describes the rise as “devastating”. He says, “millions of household budgets are already stretched to the limit and this massive increase could not be coming at a worse time”.

Rising wholesale costs are behind the increase. Jonathan Brearley, chief executive of Ofgem, says the reason for raising the price cap is because of “a record increase in energy prices across the board, not just in gas and electricity but in petrol and diesel”. But the energy watchdog add that having a price cap means households could still see a yearly saving between £75 and £100.

Customers are urged to shop around for the best deals as there is potential to save up to £200 if they switch suppliers. Mr Brearley says, “you don’t have to live with this tariff. The price cap is a backstop”. He encourages customers, especially those struggling to pay bills, to contact their supplier for help and support.

However, the Resolution Foundation, an independent body focused on improving living standards for low to middle income households, says more is needed from policymakers to help families who are close to the poverty line.

A senior economist also argues there is a need for more targeted support for families at risk of fuel poverty. He says “a rise in in energy prices will disproportionately impact those who are already struggling”. The government should widen the current warm homes discount scheme, and reverse their decision to remove the extra £20 Universal Credit.

Is switching the solution?

Consumers on variable tariffs could make big savings by moving to a cheaper deal with their existing supplier or switching to a different one. The simplest way is to ask your current supplier to move you to their lowest priced fixed rate deal. Alternatively, you could receive a better deal by switching to a rival energy company. Comparison websites will help people to find the best deals for them.

However, some vulnerable people may find it difficult to switch, or impossible due to levels of debt or reduced options. Those on pre-paid meters, for example, have less choice when it comes to switching supplier or tariff.

Charities call on Ofgem to provide more protection for consumers who are most vulnerable. They also think the UK government can do more to “directly help reduce energy arrears as well as maintaining investment to reduce needless energy waste in our homes”.

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