Energy bill hikes hit millions as price cap rises by £96/yr - but many can save £250/yr by switching
Around 11 million households stuck on expensive standard tariffs will see energy bills jump by a typical £96/yr as the new price cap kicks in today. But most can save over £200/year by switching supplier - so act now to beat the hike.
The regulator Ofgem has increased the price cap today from £1,042/yr to £1,138/yr for a typical dual-fuel household. The price cap isn't the maximum you can be charged though - it sets a limit on the rates you pay for each unit of gas and electricity, so if you use more, you'll pay more.
Ofgem says the rise is down to energy demand recovering, after usage fell sharply in the wake of the first lockdown. Demand is back to normal levels, which has pushed wholesale energy prices (what suppliers pay for gas and electricity) back up. The price cap announced today also includes a £23/yr add-on to help suppliers cover coronavirus costs.
You don't have to pay more if you've been hit by the hike though - check now if you can switch and save. If you find choosing a new energy tariff confusing, try our free Pick Me A Tariff tools to find the cheapest deal based on your preferences. Or you can do your own full-market comparison via our Cheap Energy Club.
Don't just sit back and accept the rip-off
Guy Anker, deputy editor at MoneySavingExpert.com, said: "Our message is, and has always been, that if you're on a standard tariff, check if you can switch to a cheaper deal as many can save £100s.
"Don’t just sit back and accept the rip-off as the cheapest deals on the market are on average £200+/year cheaper than the new standard rates, and with many of us still spending more time at home and using more energy as a result, it makes our call even more pertinent.
"Plus switching is easy – even in a pandemic. No one needs to visit your home (unless you want a smart meter) and you won't be left without gas or electricity. All that changes is the price and which firm bills you for your energy. It’s that straightforward."
The big energy firms have all hiked prices
Once again, the biggest suppliers have predictably priced their standard tariffs either at or within a pound of the cap. Here's the detail:
- If you have a credit meter... British Gas, E.on, EDF, Npower and Scottish Power have all hiked the price of their standard tariffs to the max allowed under the new cap – £1,138/yr on typical use, a rise of £96/yr on average. SSE have increased prices to just under the cap, at £1,137/yr, so an increase of £95/yr.
- If you have a prepayment meter... All of the traditional 'big six' (British Gas, E.on, EDF, Npower, Scottish Power and SSE) have hiked standard prices to the max allowed under the separate prepayment price cap – £1,156/yr on typical use, an increase of £87/yr.
In comparison, the cheapest deal on the market for those with credit meters is £876/yr based on typical use – over £250/yr less than the new average big six standard price. And those on prepay could save £170/yr switching to the cheapest deal, again based on typical use.
To see if you can switch and save, you can use our free Cheap Energy Club for a whole-of-market comparison. But most prefer to let us help them with our speedy MSE Pick Me A Tariff tools - it's perfect for those unsure or nervous about switching or choosing, and again covers the whole market.
How does Ofgem's energy price cap work?
The price cap limits the maximum amount suppliers can charge for each unit of gas and electricity you use, and sets a maximum daily standing charge (what you pay to have your home connected to the grid).
The price cap is reviewed twice a year, with changes coming into effect in April and October. It's set to remain until the end of this year at least, with Ofgem to make a recommendation to the Government later this year on whether or not it should be extended.
Struggling to pay your bill? There's lots of additional help available right now
Due to the pandemic, Ofgem has strengthened protections for energy customers, and put in place new rules to help those struggling to pay their bills.
Most importantly, your supply won't be cut off – disconnections of standard credit meters have been completely suspended, while new rules have been put in place to ensure prepayment customers get emergency or additional credit to ensure the lights stay on.