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Inflation-busting energy bills to continue next year

Gas and electricity bills will continue to outstrip inflation according to the Office of Budget Responsibility (OBR)

Gas flame burningThe OBR has told MPs that energy bills will rise more than the expected 2.5% inflation next year, putting further pressure on households after a year of price rises which has left bills at their highest level ever.

Robert Chote, chairman of the OBR, said the rise in prices next year will be ‘bigger than normal’:  “Some UK energy suppliers have pointed to increased distribution, network and environmental policy costs as well as wholesale energy cost pressures,” according to the OBR’s report.

“These network and environmental policy costs may persist in coming years, suggesting that further rises in retail gas and electricity prices may be likely in future.”

The news follows E.ON’s announcement earlier this week that it would raise its price 8.7% from 18 January, making it the last of the ‘big six’ to announce price rises.

Energy bills have now gone up between 6% and 11% for all major suppliers, with bills at a new all-time high of £1,352 a year: £251 or 23% higher than in January 2011.

Commenting on the forecasts, Ann Robinson, director of consumer policy at uSwitch, said: “Affordability is becoming a huge and growing concern. The overall trend in household energy prices is up and consumers need to adapt quickly. The days of cheap energy are over.

“We expect further price increases next year and would not be surprised if households see increases of as much as 15 per cent in the next 18 months to 2 years.”

What can you do?

With around £300 difference between the cheapest and most expensive tariffs on the market households are being urged to compare tariffs and suppliers, but what’s on offer?

There are a number of smaller suppliers available including Co-Op Energy, who recently announced a 2% price cut.

Those tempted to switch but worried about future price rises could also opt for fixed price tariffs. While they may pay more initially some fixed plans currently available last more than two years.

Learn more

E.ON raise prices – Until last week’s announcement E.ON was the only big supplier to not have raised prices this year.