Second price cap rise of 2021 is a 'triple blow' to households, says Uswitch

Justina Miltienyte, energy policy expert at Uswitch.com, comments: “The price cap rise is the ultimate triple blow for homes across the country. Not only is it the first time Ofgem has raised the cap twice in a year, it’s also the first time the cap has gone up before winter and the highest increase since the cap was first introduced back in 2019.

“The news might not grab people’s attention right now while their focus is very much sun, sea and sand, but an £139 average increase in rates from the start of October will arrive just when people are switching their heating back on. 

“Come October, energy bills will be an eye-watering £235 more than they were just one year ago, following a hike of £96 back in April. 

“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.”

“Switching today to the cheapest fixed deal on the market could save households £241 against the new cap, but customers should always check what’s cheapest for their own usage and region by running a comparison.”

Uswitch explains: Information about the price cap and what it is

What is the energy price cap?

“The energy regulator Ofgem sets a maximum amount that providers can charge to customers on default tariffs or prepayment meter tariffs. Approximately 11 million people on default tariffs - which include standard variable tariffs - are covered by the Default Tariff Price Cap, and four million customers are protected by the Prepayment Meter Price Cap.”

Why do we have a price cap?

“Customers on prepayment meters were finding it hard to access cheaper offers, and those who don’t shop around are getting stuck on their providers’ default tariff, which is often the most expensive. The cap is temporary while improvements are made to the market.” 

Why is the price cap changing?  

“The price cap is reviewed twice a year at set times. Wholesale energy prices have risen due to a rebound in usage after lockdown, and Ofgem is reflecting these changes in how it calculates the cap.” 

What should consumers do next? 

“Uswitch data shows there is a £241 difference between the new price cap and the cheapest fixed deals on the market. The change in price cap means bills will be lower for people on SVTs, but many could make further savings by switching to fixed deals.”

What type of deal should I switch to

“Fixed deals are the only way to avoid the volatility of the price cap. However, there are different durations of contract depending on the tariff that you sign up for. 

“Typically, most households will opt for a 12 month fixed deal, meaning that they can take advantage of the best market rates - and review their plan annually. 

“A 24 month fixed deal might be a better option for other households however, if you do commit to a 24 month plan make sure to choose a deal with zero exit fees. This means you can switch away without any hefty exit fees.”

FOR MORE INFORMATION

Ross Stebbing

Phone: 07827 836 709

Email: ross.stebbing@rvu.co.uk

Twitter: @UswitchPR

About Uswitch 

Uswitch is one of the UK’s top comparison websites for home services switching, including energy, broadband and mobiles. 

More people go to Uswitch to switch their energy, broadband and mobile than any other site, and we have saved consumers over £2.7 billion off their bills since we launched in September 2000.

Free mobile app Utrack also helps households manage their home energy usage and make potential savings. 

Uswitch is part of RVU, a group of online brands with a mission to empower consumers to make more confident home services, insurance and financial decisions.