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Ofgem, the energy regulator, has today announced that it is raising the level of its standard variable price cap from £1,138 to its highest ever point of £1,277 - £23 more than its previous highest level of £1,254. This constitutes an increase of 12% and is the first time the cap has risen twice in a year.
The regulator has also announced that the price cap for prepayment customers will rise to £1,309, which is an increase of 13.2% from its previous level of £1,156.
The increases are a response to high wholesale energy prices, which have increased energy suppliers’ costs and prompted Ofgem to allow them to charge customers on standard variable tariffs more for their energy.
The energy price cap was introduced in January 2019 and sets the maximum price energy suppliers can charge per unit for their standard variable or default tariffs. The cap is reviewed twice a year in February and August, with the new rates coming into effect in April and October.
These price increases will affect around 11 million customers on standard tariffs and four million on prepayment meters. A recent Uswitch report found that 25% of households, already struggling to stay on top of their bills thanks to the various lockdowns over the past 18 months, would struggle even more with an increase of just £10 on their energy bills each month.
Justina Miltienyte, energy policy expert at Uswitch.com, said: “This should be a real wake up call to consumers that the price cap will not protect them from skyrocketing bills.
“Unfortunately, the writing was on the wall for the cap to go up again, following the continued rise of wholesale prices this year. Prices collapsed in 2020 due to low demand during lockdown, but energy usage has dramatically bounced back.
“Households on standard variable tariffs have faced continued uncertainty over bills, with prices rising and falling as the price cap pendulum has swung to and fro every six months. But this time, it’s less of a pendulum and more of a pummelling.
“Now is the time to act in order to avoid being hit by this price rise, and to get protection from future market volatility. It takes just minutes to check what deals are available and switch to a cheaper fixed tariff ."
In years gone by, this would have been an unequivocal “yes”, but given the price of wholesale energy, prices of fixed tariffs are as high as they’ve been for years. There are still deals to be had - the cheapest fixed deal on Uswitch is £241 cheaper per year than the price cap level*.
Take a look at the table below to see the cheapest fixed deals currently available at Uswitch.
Based on average bill sizes for a medium energy user on a dual fuel plan paying by monthly direct debit, and averaged across all regions. This information is updated hourly with energy plans which are available to switch to through Uswitch. To appear in this table, plans must be available in at least 7 of the 14 regions.
*Cheapest deal available at 07:15 on 06/08/21: Avro Energy Simple And Flow12m. Average cost £1,035.53 based on the average bill size for a dual fuel customer consuming medium energy usage as defined by Ofgem (2,900 kWh of electricity and 12,000 kWh of gas per year), paying by direct debit, with paperless billing. Prices averaged across all regions.