Energy bill hikes hit millions as price cap rises by an average £700/year – what you need to know
We've been warning about big energy price hikes for months, but the harsh reality hits home today (Friday 1 April), as about 22 million households will see a massive jump of an average £700/year on their energy bills, as the new price cap kicks in – with most suppliers pricing their standard tariffs on or near the max allowed. Unfortunately, due to the dire state of the energy market, most still can't save by switching. Here's what you need to know.
The majority of households are now on these standard tariffs – you'll be on one if you've never switched, your fixed deal ended and you didn't switch again, or if your provider went bust and you were moved across to a new supplier.
But bear in mind the new cap level isn't the maximum anyone will pay. The price cap sets a limit on the rates you pay for each unit of gas and electricity, so if you use more, you'll pay more. For a full breakdown, see the new and old price cap rates.
For more help, including whether you should go for a fixed energy deal now, see Martin's latest energy market video explainer. We've also been inundated with questions from those seeing price rises far above the price cap hike – if that's you, see Martin's 'Why's your energy bill gone up by over 54%?' video.
Have you done a meter reading? There's still time
If you're on a standard tariff, doing a meter reading now reduces the risk firms will wrongly allocate any of your pre-rise usage to the new higher cost. Yet with record numbers flocking to supplier websites to do a reading before the price cap increased, many firms' website and mobile apps faced technical issues – leaving people unable to submit meter readings.
If you struggled, don't panic. All the major providers we spoke to told us customers can submit meter readings they took on Thursday 31 March until the end of the week (some give even longer, but it's best to do it as soon as possible to be on the safe side).
If you didn't take a meter reading before the price cap increased, don't worry. You can still take one now or in the next few days – but the nearer you do it to the price cap change the better, so just get it in as soon as you can.
There are still no open market tariffs that are cheaper than the new price cap – so for most, it's likely still best to do nothing
The market's cheapest deal that you can switch to right now is £2,750/year – that's considerably higher than the new price cap. At that rate, fixing now is still unlikely to be worth it. We have, however, seen energy providers offer cheaper deals to their existing customers. For full info, see Martin's latest 'Should you fix now?' video.
The new price cap will last until 1 October 2022 and will then change based on wholesale energy rates from the beginning of February until the end of July. We're already a few months through this assessment period, and wholesale energy prices (what providers pay) are still high. According to the latest predictions from energy analysts Cornwall Insight, we could see a 32% rise on top of the Friday 1 April hike, which could push prices up to about £2,600/year.
Factoring this increase, and taking into account that switching to a new firm typically takes about 17 days on average, our best guess is that it could be worth switching if you're offered a fix that's no more than about 19% to 22% more expensive than your price-capped tariff from today – especially if you value price certainty.
The big energy firms have all hiked prices to or near the max allowed
Once again, the biggest suppliers have predictably priced their standard tariffs either at or within a pound of the cap. Here are the details:
- If you have a credit meter... British Gas, E.on and Scottish Power have all hiked the price of their standard tariffs to the max allowed under the new cap – £1,971/year on typical use. EDF, Ovo and SSE have increased prices to just under the cap, at £1,970/year.
- If you have a prepayment meter... British Gas, E.on, EDF and Scottish Power have hiked standard prices to the max allowed under the prepayment price cap – £2,017/year on typical use. Ovo and SSE have raised prices to just under the cap, at £2,015/year.
For more info, see our supplier-by-supplier round-up.
Struggling to pay your bill? There's additional help available
The massive hike to the price cap will pile on the pressure for many households already struggling with rising costs.
If you're having issues paying for your gas and electricity, our Struggling with energy bills? guide details all the help available. This includes when to speak to your provider, what grants and help schemes you may be able to access, how to get free energy and debt advice, and the freebies and grants that can improve your home's energy efficiency, plus more.
It's also worth seeing if you can use less to cut bills – our energy saving tips can help with the simpler stuff, such as turning your thermostat down and cutting shower time, while our Energy mythbusting guide looks at the less clear-cut questions, such as whether to leave the heating on low all day.
How does the price cap work?
The price cap sets a limit on the maximum amount suppliers can charge customers on standard tariffs 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).
As the cap limits the price providers can charge for each unit of gas and electricity, if you use more energy, you'll pay more, use less and you'll pay less.
The price cap is currently reviewed twice a year, with changes coming into effect in April and October. However, we're expecting Ofgem to announce major changes later this year – see our Price cap explained guide for news when we get it.
While you're unlikely to save, you can do a comparison to check yourself
If you do want to compare your energy tariff, you can do a Cheap Energy Club comparison, though be aware that due to the state of the market, you'll see a lot fewer tariffs than you'd usually expect.