Eco-Living Magazine

Energy Bills Rise as Ofgem Increases Price Cap by £694

Posted on the 03 February 2022 by Ecoexperts @TheEcoExperts

The announcement from Ofgem came earlier than expected, with the UK government poised to introduce a possible £200 'safety net' measure to ease the financial blow to some households.

Taking effect from April 1st, the price cap rise is a direct result of the ongoing energy crisis. In short, energy suppliers have had to buy gas at far higher prices that they normally would. Combined with UK tariffs that prevent suppliers charging over a certain amount, this has meant energy providers have been selling gas at a loss.

Nearly 30 energy suppliers (over half of all suppliers in the country) in the UK have gone bust because of this, including some of the biggest hitters in the industry. The price cap rise will help alleviate some of the strain on the surviving energy suppliers, as they can now pass a greater portion of the costs onto customers.

As the largest ever hike for UK energy bills, it was initially expected that Ofgem would announce this on the coming Monday. Speculation surrounding the maximum energy tariff however, has clearly led Ofgem to believe they needed to make the announcement earlier, likely to calm the growing concern.

Who will be affected?

Those affected by the price hike include any UK citizen who is currently on either a standard variable tariff, those on a fixed deal that has come to an end (or is set to), and people who were moved to a new supplier after their old one collapsed.

People on prepayment meters, numbering around 4.5 million, will also be affected by a separate cap. This will see the average annual bill rise to £1,309 for people in this category using a typical amount of gas and electricity.

Businesses are concerned about the price cap rise too, with big supermarkets such as Iceland coming out to say they fear they'd have to "bear the brunt" of the increase.

Richard Walker, the managing director of Iceland, said that "2022 is probably set to be the hardest year ever for many UK families," as the impact of the price cap rise reduces spending power. The obvious effect of this is that supermarkets and many other businesses will see lower spending in their shops.


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