Energy bills set to rise by up to £96 for millions from April as price cap is hiked

5 February 2021, 07:18 | Updated: 5 February 2021, 08:03

Millions of people face a hike to their energy bills. Picture: PA

By Asher McShane

Millions of people across the UK could see their energy bills go up by almost £100 after Ofgem increased its price cap.

The regulator said suppliers could pass the cost of rising gas and electricity prices on to customers, leaving 15 million households facing the hike.

The price cap for Britain's 11 million households that are on their supplier's default tariff could rise by £96 to £1,138 from April 1.

A further four million households with pre-payment meters could see their bills jump by £87 to £1,156.

Ofgem is encouraging people to 'switch suppliers' in a bid to bring down bills.

"Energy bill increases are never welcome, especially as many households are struggling with the impact of the pandemic. We have carefully scrutinised these changes to ensure that customers only pay a fair price for their energy," said Ofgem chief executive Jonathan Brearley.

He added: "The price cap offers a safety net against poor pricing practices, saving customers up to £100 a year, but if they want to avoid the increase in April they should shop around for a cheaper deal."

The decision comes on top of an additional £23 rise that energy suppliers have been allowed to charge customers for bad debt.

During the coronavirus crisis the companies have struggled to get some households to pay their bills, so Ofgem decided they needed to allow the suppliers to spread that cost across the country.

The latest announcement more than wipes out the gains that households made in October, when the price cap dropped by £84 to a record low since the policy was introduced in January 2019.

Ofgem reviews and changes the price cap once every six months.

Mr Brearley added in a statement: "The price cap offers a safety net against poor pricing practices, saving customers up to £100 a year, but if they want to avoid the increase in April they should shop around for a cheaper deal.

"As the UK still faces challenges around Covid-19, during this exceptional time I expect suppliers to set their prices competitively, treat all customers fairly and ensure that any household in financial distress is given access to the support they need.

"The Government and Ofgem have been working with the energy industry and consumer groups to support customers through this difficult time and I urge anyone worried about paying their energy bills to contact their supplier and access the help available."

Richard Neudegg, head of regulation at Uswitch.com, said: “The price cap increase is an aftershock of last year’s lockdown, partly because many customers have struggled to pay their energy bills, plunging them into debt that suppliers have been unable to recover.

“With more of us at home, usage remains high and energy costs hike, there’s a very real danger that the rising price cap will end up trapping households on default tariffs into a vicious circle of energy debt.

“The good news is that there are plenty of fixed deals available that would protect households from market volatility and provide not just certainty and reassurance, but significant cost savings."

The £1,138 annual cap is calculated based on the usage of an average household. Energy suppliers are required to price below that cap. Most set their prices a couple of pounds below the cap level.