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Energy Price Cap could rise £150 hints Ofgem chief

Richard Simmonds • July 30, 2021

The head of the energy market regulator Ofgem has hinted that the energy price cap could be hiked by as much as £150 from the 1st of October. Energy suppliers will be keen to see what the actual increase will be when it is announced on August 6th.

Good news for energy suppliers but not so good for consumers 

Many energy suppliers that have been struggling with the financial impacts of the Covid pandemic and reduced price cap are sure to be happy with this news, but for consumers, it will add an extra burden onto their already stretched wallets.


The price cap applies to stand variable rate default tariffs and is designed to limit how much money an energy supplier can charge for units of electricity and gas as well as any standard charges that go along with the tariff.


Currently, the energy price cap stands at £1,138 per year for a household with average levels of consumption. Smaller energy suppliers have often undercut the price cap by a considerable margin in an attempt to attract new customers but with wholesale energy prices so high some in the industry have warned that such practices could result in a swathe of business closures in October.


Also read: Worries grow over possible wave of small energy supplier failures in October

Millions of households to be impacted

There are around 11 million households on default tariffs and another 4 million on prepayment meters where the price cap is £1,156 per year.


A £150 rise in energy bills is sure to be a big shock to many of those customers and could lead to another rise in customers defaulting on their bill payments.


Concerns over rising bills are already high and with the media finally starting to pay attention to the astronomical costs of the government’s NetZero plans and their impacts on energy bill prices we could see a growing backlash from the public over the next few months.


Rather than reducing energy bills as is often highlighted as a benefit of green energy, bills are in fact climbing due to increasing environmental policy costs being tacked onto energy bills. Questions are starting to be asked why the consumer is having to pay out so much for something that was supposed to save them money.


The real driver for the price cap hike, however, is high wholesale energy prices which have been caused by an upsurge in demand as the global economy recovers from the lockdowns caused by the pandemic.


 “Regrettably, the increase in wholesale costs will feed through to the price cap and, although final analysis is not complete and other costs will also determine the overall level, it could add around £150 per household to the next level of the price cap. While the price of these fixed contract deals is also increasing on the back of higher wholesale energy prices, if you shop around, you may well still be able to save hundreds of pounds on your energy bill,” said Ofgem chief Jonathan Brearley in a statement.


Also read: Energy Price Cap Extended to 2023 and Energy Bill loyalty penalties to be tackled pledges UK Government


If you’d like to enter the UK energy market, get in touch! Dyball Associates team of energy market consultants can guide you through the steps to get qualified and attain your gas or electricity licence.

 

Whether you’re looking for electricity and gas systems or support on starting an energy supply company, Dyball Associates can help


Further Reading

Number of Energy Supplier switches reaches 3 million and Number of Smart Meter Installations has surpassed 1.2 million so far in 2021


Gas Boiler Ban likely to be pushed back until 2040 due to anger over costs


Ofgem and BEIS launch Consultation on how to overhaul the ‘overly complex’ UK energy code governance framework


Dyball Associates are proud to help new supply businesses successfully launch in the UK market.

 

Through our energy market consultancy services, and the software we've developed, we're supporting new UK electricity and gas suppliers get set up and start supplying.


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