Millions of people across the UK will see their energy prices rise in April, with costs returning to pre-pandemic levels due to changes in wholesale prices.
The price cap for default domestic energy deals will raise by £96 to £1,136, to cover extra costs suppliers face, the energy regulator Ofgem said.
What is the price cap?
The energy price cap is set twice a year by Ofgem, and is designed to protect more than half of households in England, Wales and Scotland which are on poor value default tariffs. This is often because customers have loyally stuck with the same provider for years, and any previous fixed rate discounted deal has expired. Northern Ireland set its own price cap.
The cap sets the prices that suppliers can charge for each unit of energy. However, this does not mean there is a limit to how much people can pay on their bills. That is still determined by the amount of gas and electricity used in each household.
Who is affected by the increase?
The price increase will likely affect 11 million default tariff customers.
For those using payment meters, there will be an increase of £87, to £1,156, affecting four million customers.
The increase will happen on 1 April 2021.
Ofgem has been allowing the increases to cover high levels of debt from customers unable to pay their energy bills due to the impact of Covid-19 on finances.
Jonathan Brearley, CEO of Ofgem, said: “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.”
Over the winter period, the price cap level fell by £84 in October, in reaction to a drop in wholesale prices. However, the demand for energy has now recovered, pushing the wholesale puce back up to levels more normally seen.
Shop for deals
Customers looking to avoid an increase in their bills have been encouraged to to shop around for deals before 1 April 2021.
Brearley 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.
“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.”