Yesterday (3rd February 2022), the energy regulator, Ofgem, increased the energy price cap by 54% coming into effect from 1st April.
This was more than expected and will on average see customers’ bills rise by £693 to £1971 if paying by direct debit on a variable tariff. If customers are using prepayment meters, their bills will increase by £708 to £2017 on average.
It is a cap that is put in place to stop energy companies from making excessive profits. This then ensures that customers pay no more than a fair price for their energy. It allows these energy companies to pass on all reasonable costs to customers, including any increases in the cost of buying gas.
The price cap impacts energy prices but bills will not rise yet if you are on a fixed deal. The energy cap does not represent the cost of your bill, instead it sets the price of what suppliers can charge per unit of energy.
Ofgem explained that the increase was driven by a record rise in global gas prices over the last six months with wholesale prices quadrupling in the last year.
Other reasons include:
Rebate loan – a £200 rebate loan is planned to be applied to energy bills from 1st October, repaid £40 per year for 5 years from the following April.
Council tax rebate – English homes in council tax bands A to D will get a non repayable payment of £150.
Warm house discount scheme will be expanded to cover 3 million households.
Discretionary fund – local councils will have access to a £140 million fund to help out those struggling in their areas.
The chancellor, Rishi Sunak, said that the proposed packages mean 80% of households would receive £350 in support this year. Unfortunately most households will still be about £1000 worse off due to the energy cost rise and the National Insurance hike.
Prices are not due to rise until 1st April and will last until 1st October. It is predicted that the price cap will then rise by a further 20% from then.
If you are having difficulty with your finances and debts, please contact us. We may be able to help you.