UK energy bills could rise by £100 per year as regulators are set to announce a major hike to the energy price cap on default gas and electricity tariffs, just weeks after it was first introduced.
As of the 1st January, a price cap has been implemented by energy regulator, Ofgem, for customers on “standard variable tariffs”, which customers are put on once their deals have concluded.
The cap was push forward by UK Prime Minister Theresa May to prevent those less likely to shop around for better deals being ripped off by energy suppliers.
At its launch, Ofgem said the cap at £1,136 would save consumers an average of £76 per year for the typical dual fuel customer.
Analysts now expect this to rise by as much as £100 when the regulator revises the cap on 7th February, eliminating all saving households have made so far.
According to industry sources, Ofgem was under significant pressure to produce a “politically acceptable” number when designing the cap.
Dermot Nolan, chief executive at Ofgem, said: “While I cannot say today exactly what it will be, wholesale costs have risen significantly over the last year. As a result, it is likely that we will announce an increase – and potentially a significant one – in the level of the cap.
“Even if this is the case – and obviously I hope that any increase can be ameliorated and as minor as possible, but ultimately I can’t guarantee that as we are committed to passing through efficient costs – customers can still be confident that any increase in the cap only reflects changes in the actual costs of providing the gas and electricity they use – and that they will always pay, as a result, a fair price for their energy.”
Richard Neudegg, head of regulation at uSwitch.com, said: “Energy prices are going to go up in April if you’re on a default tariff. When the cap was introduced it was supposed to save people £76 a year. But increases in wholesale costs mean the expectations are for the cap to rise by £80-£100 on average, wiping out any savings that may have been made.”
“Energy customers can switch to a fixed deal that is much cheaper than the price cap right now, saving money on their bill and insulating themselves from twice-yearly changes to the cap.”