The energy price cap will rise by at least £100 

Energy analysts are predicting that the recently introduced energy price cap will rise by as much as £100 when Ofgem reviews the level this month.

The first review of the level is scheduled to take place on February 7th 2019, ahead of changes being implemented in April.

Dermot Nolan, chief executive of Ofgem, commented: “While I cannot say today exactly what it will be, wholesale costs have risen significantly over the last year. As a result, it is likely that we will announce an increase – and potentially a significant one – in the level of the cap.”

He went on to reassure customers that a change in the energy price cap would only reflect the changes in the actual cost of supplying gas and electricity ,saying that “they will always pay, as a result, a fair price for their energy."

As expected, consumer groups are up in arms about the price rise. The Telegraph claims that a rise of£100 would be the biggest increase to energy costs ever seen in a single day.

Martin Lewis, founder of Money Saving Expert, has warned consumers that they should enter a fixed rate contract as soon as possible to avoid any increase on their bills.

He also pointed out that although the cap may have saved some on SVTs around 10% on their bills, switching to a fixed deal could have saved them as much as 25%. He predicts that the cap level will rise to around £1,240 a year.

During his interview on This Morning, Lewis referred to small provider Avro as being the cheapest deal on the market right now. He said that a one year fix from them is currently £990 per year.

 As we previously reported , a predicted side effect of the price cap could be that fewer consumers will be inclined to switch. All of the big six priced their SVT at within a few pounds of the cap limit, causing outrage from smaller suppliers whowere still well below the limit.

However, big suppliers have hit back, claiming that the energy price cap was set too low, and that any suppliers pricing well below this are deliberately selling themselves short in order to appear at the top of the comparison tables. Centrica, owners of British Gas, are even taking legal action over the impact the energy price cap will have on their business.

SSE have called this practice ‘irresponsible’ and blames this type of pricing strategy for the string of supplier failures we’ve seen over recent months.

One of the real hidden costs of the energy price cap is the raising of the fixed tariff deals. As suppliers prepared for the squeeze on their profits, the cheapest deals on the market began to vanish, according to Which ?

Their research suggests that by December, there were only eight tariffs available which come in at less than £1,000 a year for the average user. That’s compared to a choice of 77 at the start of 2018.

For suppliers, arise in the energy price cap will allow a bit of breathing room following the tough winter period. However, with wholesale prices rising now, and many small suppliers struggling to make ends meet, the question is, will it increase soon enough to stop more suppliers failing?

We’ll continue to update you on the latest news on the energy price cap, but if you do have any concerns, contact us to find out how it might affect our energy supply business .

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