Well, you’re absolutely right. The reason behind this? It’s something called a “default tariff cap” or an “energy price cap” that Ofgem, the energy regulator, reviews this twice a year.(1)
The most recent one came out this August, with a 12% increase due this winter. You’ll definitely realise the change this year – Ofgem has announced they’ll be increasing the price cap by £96 to £1,138 for 11 million customers on a standard dual-fuel energy tariff, and by £87 to £1,156 for four million prepayment meter customers.
Households around the UK will see this price increase in energy bills from October 2021.
This may all sound really overwhelming, energy can be confusing at the best of times. This is why we decided it would be best to explain it a little bit better without the confusing jargon.
What is an Ofgem Energy Price cap?
In 2019 Ofgem established a price cap on energy prices to help ease the financial burden of climbing energy costs on UK households.
This is reviewed once every six months, with the cap level set for winter and summer energy prices, based on the energy market costs causing your prices to rise or fall. Prices may go up in summer, but your bill will come down as you use less energy.
It is worth knowing this is applicable to those on standard variable tariffs and prepayment tariffs.
This is the current breakdown of the cap:
Note: Cost breakdowns above do not add up exactly to total cap levels due to rounding effect.
What does this mean for you?
This winter your energy bill could be rising to the highest price yet, due to the rising cost of fossil fuels (2). However, as mentioned previously, this is only applicable to those on standard variable tariffs and prepayment tariffs.
According to Which’s calculations, if you consume a medium amount of gas and electricity, you can expect your bill to increase by around £139 per year. (3)
If you’re on a prepayment meter tariff, expect to pay around £153 more per year.
If you pay when you receive your energy bills, your bills could go up by £149. But the exact extra amount you’ll have to pay all depends on how much power you use. The price cap is not an absolute limit on your bills.
How can you help reduce those costs?
On the bright side, you can help reduce these extra costs. Energy bills are a reflection of how much gas and electricity you consume. With that, you can be more energy efficient in your homes and save yourself money.This is how:
Switching to a fixed contract will help you from exposure to the price increases. We have a range of fixed and variable energy tariffs to meet your needs. Why not get a quote now?
Switching to a smart meter may not magically help reduce your costs but it can check your real-time usage and your behaviour. This can help reduce your energy usage, which saves you money. However it doesn’t affect everyone, as we’re all different and behave differently. Find out more about smart meters here
The Energy Trust recommends turning off standby appliances which will save you £30 a year. And if you install room thermostats, programmers and thermostatic radiator valves, you could save around £75 a year. (4)
The Energy Trust also recommends that turning your heating down by just one degree could save up to £80 a year.
Whilst energy-saving bulbs can be a little expensive, it is best to switch in the long run. Switching to energy-saving light bulbs can save you £60 over the bulb’s lifetime as they last up to 10 times longer than traditional bulbs. (5)
There are so many ways to save on your energy, it needs another blog!