Millions of people across the UK will see their energy prices rise in October. Regulator Ofgem said the price cap for default domestic energy deals would be raised to cover suppliers extra costs. The typical gas and electricity customer is likely to see their bill go up by £139.
Charities have warned that the timing would hit struggling families hard, who already faced losing an extra £20 a week from Universal Credit. Customers on a default direct debit tariffs will face the sharpest jump with their bills leaping to a record average £1,277 a year, while pre-payment customers will see a rise from £1,156 to £1,309, the regulator said.
Ofgem chief executive Jonathan Brearley told the BBC: “The reason the price cap is going up is there has been a record increase in energy prices across the board, not just in gas and electricity but in petrol and diesel. He urged customers to shop around for the best tariffs, saying there were big savings to be made by switching.
“You don’t have to live with this tariff. The price cap is a backstop. We’d encourage any customer, particularly those struggling to pay their bills, to contact their supplier, and get access to a wide-range of help and support,” he said.
Ofgem stated that rising wholesale costs were behind the increase, adding that the existence of the price cap meant households would save between £75-£100 a year.
The watchdog also pointed out energy users could switch to a better deal to save up to £200. Although, the Resolution Foundation says policymakers need to do more to help families who are close to the poverty line.
Why Are Energy Prices Rising?
Domestic energy costs are linked to wholesale prices, the price at which energy businesses must pay for gas and electricity. Wholesale prices have increased after gas prices soared to a record high as many economies recovered strongly from the Covid-19 crisis, prompting a surge in demand for energy.
Last summer, wholesale prices fell following the first lockdown, Ofgem reduced the level of the cap by £84 for last winter. But in February the cap was by £96 as wholesale costs rose. Since then, the wholesale cost of energy accounting for 40% of domestic costs has soared by more than 50%, which has led to the latest increase.
EDF, one of the UK’s major energy providers, said the “unprecedented rate” at which wholesale prices were rising meant that customers would “at some point see the impact of this global trend”.
Chief executive Emma Pinchbeck told the BBC’s Today radio programme: “There’s help and assistance available, particularly for those that are vulnerable and fuel poor.” She also urged people to consider switching supplier, calling it a “straightforward” process.
Are you tired of energy costs increasing year on year?
By installing Solar PV panels with Hero Renewables in your home or business it allows you to cut your energy costs dramatically, and you can also reduce your carbon emissions as using the sun’s energy is environmentally friendly way of making energy whilst producing no harmful emissions as a by-product.
Ensure that your 2021 is sustainable by giving our team on 0808 222 0 111, to find out what system is perfect for your home.