Energy bills to rise by up to £96 for millions as Ofgem hikes price cap

Increased wholesale costs have driven the increase, but suppliers can also charge extra to cover coronavirus bad debt.

Image: The increases come as many households are struggling with the impact of the pandemic

Around 15 million families will see their energy bills rise by up to £96 after the regulator hiked the price cap.

The return to pre-coronavirus levels is mainly as a result of increase in wholesale costs, according to Ofgem.

For six months from 1 April the price cap will increase by £96 to £1,138 for 11 million default tariff customers, and by £87 to £1,156 for four million pre-payment meter customers.

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Image: Ofgem reviews and changes the price cap once every six months

Customer who are on fixed tariffs, which are more likely to be better value, are unaffected by the cap.

Ofgem points out when wholesale energy prices fell sharply last year in the wake of the first COVID-19 lockdown, the price cap dropped by £84 in October to its lowest level yet for the current winter period.  

Demand for energy has since recovered which has pushed prices back up to more normal levels.

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For the default tariff price cap level, Ofgem has also allowed suppliers to claim £23 to cover higher levels of customer bad debt with more people being unable to pay their bills due to the impact of the pandemic.

The regulator decided it should let companies spread this cost burden across households.

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Ofgem reviews and changes the price cap once every six months.

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Ofgem chief executive Jonathan Brearley told Sky News' Ian King Live programme: "It was absolutely necessary. We recognise that this is a difficult time for many people due to the COVID crisis.

"The reason we have done is that wholesale energy prices have changed, particularly globally the gas price has changed, and we need to reflect that in the price cap that we use."

In a message to consumers he said: "The best way to get the best value out of this market is to get in and switch your supplier. You can do better than this price cap we estimate by around £150.

"But for those people who are struggling, contact your supplier, get onto a better tariff, but equally get access to the support that is in place for you.

"We have worked very closely with the industry to make sure that customers who are struggling with their bills are looked after as best we can through this pandemic."

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But Citizens Advice acting chief executive Alistair Cromwell called the increase "a heavy blow to a lot of households", and said it would come as benefits are also slashed for many.

Emma Pinchbeck, the chief executive of Energy UK, a trade body for energy suppliers, said: "Today's rise reflects that the cost of buying energy - by far the biggest part of the bill - has risen significantly over the last few months.

"It also includes a greater allowance for debt given the difficulties many customers are facing in paying bills at present."

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