From April this year, around 15 million households will see their energy bills rise by more than £100 a year. The energy regulator Ofgem, says it is lifting the price cap because wholesale prices have risen.
Ofgem sets maximum prices for energy suppliers that can be charged to customers. The new cap could see households typically pay an extra £117 a year.
Dermot Nolan, Chief executive of Ofgem spoke with the BBC: “We can assure these customers that they remain protected from being overcharged for their energy and that these increases are only due to actual rises in energy costs, rather than excess charges from supplier profiteering”.
What is a price cap?
An energy price cap is a flagship government policy bought in to help vulnerable low income customers and households who have stayed loyal to their energy suppliers.
Ofgem sets the price that energy suppliers are allowed to charge households, energy companies are not allowed to charge customers higher than the cap set by Ofgem.
Why are prices rising?
The global price of oil has risen dramatically, and because of this Ofgem is allowing suppliers to charge more. The costs of transporting energy and environmental costs have also risen.
Alex Neil from Which? Spoke to the BBC: “This eye-watering increase to the price cap will be a shock to the system for people who thought that it would protect them from rising bills.”
How will the increase affect you?
The cap comes into effect in April, by which time winter will be over and we won’t be using our electricity as much. You could also shop around for a better deal, some energy suppliers may offer cheaper tariffs to new customers.
The cap is set to be reviewed again by the start of October, so Ofgem may lower the cap again to cover the Autumn and winter.
Water Bills set to rise by 2%
Water and sewage bills in England and Wales are also set to rise by 2% from April, meaning the average water bill will be £415.
The 2% increase will go towards a £44 billion investment to cut 370 million litres a day leaking from pipes that are in need of repair. The Consumer Council for Water is urging water companies to do more for the most vulnerable customers by injecting their own profits into social tariff schemes designed to help cash-strapped households. More than 500,000 households benefit from these schemes.
Chief Executive of The Consumer Council for Water, Tony Smith said: “Many customers will see their bills rise from April, largely due to inflation. Even just a small increase has the potential to hurt the 3 million household who tell us they struggle to afford their water bills. We’d like to see companies go further by dipping into their own pockets to help customers that are already feeling the pinch.”