UK’s price cap increase to dent customer’s pockets

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Britain’s energy price cap will increase from 1 October 2021 for the 15 million customers it protects.

According to a statement from Ofgem, those on default tariffs paying by direct debit will see an increase of £139 ($193) from £1,138 to £1277 ($1,584 – $1,777), and prepayment customers will see an increase of £153 ($213) from £1,156 to £1309 ($1,609 – $1,822).

This cause of the increase is a rise of over 50% in energy costs over the last six months with gas prices hitting a record high as the world emerges from lockdown, says Ofgem. Surging global fossil fuel prices are already driving up inflation for consumers, making fixed-rate energy tariffs not covered by the price cap, as well as petrol and diesel more expensive.

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Jonathan Brearley, chief executive of Ofgem, said: “Higher energy bills are never welcome and the timing and size of this increase will be particularly difficult for many families still struggling with the impact of the pandemic.

“The price cap means suppliers only pass on legitimate costs of supplying energy and cannot charge more than the level of the price cap, although they can charge less.

“If you’re struggling to pay your bill you can get in touch with your supplier to access the help that’s available and if possible, shop around for a better deal.”

The price cap offers a safety net for customers who haven’t switched by making sure that suppliers only pass on legitimate costs. Those on default tariffs are saving an estimated £75-£100 ($104 – $139) or £1 billion ($1.4 billion) every year as a result.

Customers must shop around to save

Ofgem encourages vulnerable customers who are worried about paying their energy bills to contact their supplier to access the support available. Customers may be eligible for extra help such as affordable debt repayment plans or payment breaks, emergency credit for prepayment meters and a £140 ($195) bill rebate under the Warm Home Discount.

Furthermore, Ofgem is urging customers to investigate a variety of suppliers to save money before the increase takes effect on 1 October. Those who don’t want to switch supplier or are unable to can ask their supplier to put them on a better deal.

Brearley stated: “We have put tough rules in place to ensure suppliers treat customers who are struggling with bills fairly, and welcome their commitment to reach out to those who most need help this winter. Where help is not forthcoming, we will not hesitate to act.

“I appreciate this is extremely difficult news for many people, my commitment to customers is that Ofgem will continue to do everything we can to ensure they are protected this winter, especially those in vulnerable circumstances.”

Ofgem adjusts the price cap twice a year based on the latest estimated costs of supplying energy.