Earlier this month, energy regulator Ofgem confirmed that it was allowing suppliers to increase energy bills for 15 million households across the UK. In response, E.ON, SSE and Scottish Power have all confirmed that customers on their standard variable tariffs will see the cost of their energy bills rise by £139 per year. The price hike is the maximum allowed by Ofgem and will come into effect from October 1st 2021.
E.ON, SSE and Scottish Power have all followed in the footsteps of EDF Energy, which was the first large supplier to confirm that it was raising the price of its standard variable tariff by £139 from October 1. With these three large suppliers following shortly after, it’s now expected that many more will follow suit.
If you’re supplied by any of the above providers, then now is the time to take action and switch supplier and tariff before prices rise.
By running an online energy comparison, you’ll be able to see all the latest deals from the country’s best energy suppliers. Once you’ve provided some basic information about your home and your energy use, you’ll be shown all the best energy deals in your area and you’ll be provided with a breakdown of how much you could save by switching. The whole process only takes a few minutes and you could save hundreds of pounds.
Why are prices rising?
Energy bills are rising because the price cap, which is the maximum amount a supplier can charge for a unit of energy, is also increasing. The cap was introduced back in 2019 and it’s designed to safeguard 11 million customers on standard variable tariffs and four million homes who use prepayment meters.
The price cap puts a ceiling on the price a customer pays for a single unit of gas and electricity. As a result, it is a cap for prices, not bills. Due to this, customers should not use the price cap to save money on their bills and it should only ever be seen as a backstop.
A new energy price cap is announced twice per year. Back in April, it rose by £96. In October, it will rise by £139. As a result, customers on standard variable tariffs are seeing their bills rise substantially for the second time this year.
However, although bills are rising with the new price cap, it’s important to point out that these customers are still expected to experience savings when compared with the amount they’d pay if the cap didn’t exist. But, although it’s currently estimated that the price cap saves these customers around £100 each year, those affected could save even more by switching provider.
Ofgem sets the price cap after examining a number of factors. This time, rising wholesale prices, increased demand and a lower supply of gas imports have all contributed to the price increase.
In the last six months, it’s estimated that wholesale gas prices have more than doubled. Subsequently, with market costs rising, the new price cap reflects the increased price suppliers are paying for wholesale energy, with these costs being passed onto the consumer.