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End Fuel Poverty Coalition warns of ‘potentially disastrous’ energy price cap hike in October

Richard Simmonds • Jul 13, 2021

Energy analysts and forecasters are predicting that winter energy prices are set to soar with the regulator Ofgem expected to be forced to hike the energy price cap by more than £100, a move that will put even more strain on customer finances and risk further energy bill defaults.

energy bill struggles

Why the surge in prices?

The issue of rising wholesale energy prices has been mounting throughout the past year but a combination of heightened demand from Asia for gas and the reopening of many western economies as they emerge from the Covid-19 pandemic has seen pressure on supplies mount and prices rise.


A long cold winter also played its part in sending prices soaring and as the UK shifts further away from fossil fuels to enact its green policies more demand is being placed on renewable sources such as wind and solar.


New regulations and schemes to help the nation achieve its NetZero ambitions by 2050 are also playing their part in the energy price rises as energy suppliers, energy producers and the government seek means to fund the plans that some economists are predicting will cost the country a staggering trillion pounds at least.


Energy suppliers meanwhile have been struggling with rising numbers of customers defaulting on their energy bills and as government Covid-19 support ends they will need to raise prices to cover their financial shortfalls.


In short, a perfect storm is coalescing to send electricity and gas prices climbing this winter.


Also read: Energy Supplier Customer Satisfaction fell to an all-time low in Q1 2021 says Ofgem data


The Energy Price Cap

The energy price cap has already been raised this year after Ofgem hiked it by £96 to £1,138 back in April. The move impacted 11 million default tariff customers and saw it return to pre-pandemic levels. The move also impacted customers on prepayment meters with the cap climbing £87 to £1,156.


The purpose of the price cap is to try and keep a lid on energy prices but a second hike over the course of the same year is demonstrating just how difficult a challenge Ofgem is facing when trying to keep prices viable for consumers.


Cornwall Insight consultants are forecasting that the next change will be announced on August 7th and that the cap will increase by at least another £100. The changes will then come into force in October.


Also read: Energy Price Forecast Winter 2021: Covid-19 aftermath, harsh weather and low supplies all point to rising Energy Bills

Energy Suppliers need to be aware of the most vulnerable

Another increase to the price cap is sure to put even more consumers under pressure financially and we can expect to see another increase in the number of households struggling to pay their energy bills.


“Rising wholesale energy and commodity prices are set to increase the cap by at least another £100. That will push up this winter’s default tariff price cap to around £1,250 per year for a typical dual fuel direct debit customer,” said Dr Craig Lowrey, senior consultant at Cornwall Insight.


Increased pressure on finances is almost certainly going to put the most vulnerable at even more risk with elderly people most likely to be hit the hardest.


“There are more than four million people already behind on their household bills. This increase will be disastrous. The choice between heating or eating will become even starker. Living in cold damp homes has health risks. The government needs to provide emergence financial support,” said Simon Francis, co-ordinator of the End Fuel Poverty Coalition.


Also read: What Should You Do When Selling Energy to Vulnerable Customers?


Do you need assistance with energy billing? Our CRM and energy billing system can help you. Contact us to find out more.

Further Reading

Add your Customers to the Priority Service Register with Dyball’s CRM


Total number of DCC connected Smart Meters surpassed 12.5 million in June


Ban on Coal fired electricity brought forward to October 2024


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