April 2021 will see an 9% increase to the energy price cap, meaning if you are on a standard or default variable energy tariff, your energy bills could be set to increase.
Ofgem announced a £96 increase, pushing the price cap to £1138. This is a result of changes to wholesale energy prices and will bring the price cap to pre-pandemic levels.
What is the energy price cap?
The energy price cap is a limit for energy suppliers on how much they can charge for the unit rate and standing charge for energy, and is set by Ofgem, the energy regulators. This is reviewed twice a year.
What is the current price cap?
The current energy price cap is set at £1042 per year. However, from April 2021, this will increase by £96 to £1138.
However, it’s important to note that the price caps are estimated on a typical dual fuel energy customer paying for their energy by direct debit, and due to this, your energy bills increasing will all depend on your usage.
Why is the price cap going up?
Wholesale prices fell sharply last year following the first lockdown and the price cap followed suit, falling by £84 in October 2020 during the winter period.
However, demand for energy has since recovered and hence pushed energy wholesale prices back to its normal standards.
April 2021 will see the price cap increase by £96 and is set to effect over 11 million customers who are currently on the standard or default tariff with their energy suppliers.
What if I have a prepayment meter?
The increase to the energy price cap will also affect over 4 million prepayment customers.
The current cap is set at £1070 but will increase by £87 to £1556 in April 2021.
What do I do now?
Ofgem adjust the level of the price cap up or down twice a year to reflect wholesale energy prices and the costs of supplier electricity and gas for energy suppliers.
The price cap also protects customers that have not switched energy suppliers by ensuring they pay a fair and level price for their energy.
Energy suppliers will also continue to support customers that are struggling to pay their energy bills, including those in vulnerable circumstances, and affected heavily by the pandemic.
The next review of the price cap will take place in August 2021, and will be based on a number of factors, such as the wholesale cost of supplying energy and operating costs.
Switch to save money!
Ofgem have recommended that customers who wish to avoid the increase and save money should shop around ahead of the increase in the price cap on 1 April.
It is important to note however that the price cap would only apply to customers if they are on the standard variable tariff with their energy suppliers, and these deals are some of the most expensive on the market!
Whether you are on the standard or default tariff with your energy suppliers or not, the best way to make sure you are on the best energy deal possible is by switching!
Here at Look After My Bills we handle the switching process for you. Every year. For Free