The energy price cap will rise by 2 per cent in England, Scotland and Wales from Wednesday
Over seven million households on a standard energy tariff have been urged to submit their meter readings to avoid paying higher prices from 1 October. The energy price cap is set to rise by 2 per cent from Wednesday for a typical household in England, Scotland and Wales, just as the chillier weather prompts many to switch on their central heating.
This means that the annual energy bill for the average household paying by direct debit for gas and electricity will increase from the current £1,720 to £1,755. The debt charity StepChange has warned that while the £35 per year increase “seems like a small amount”, new figures reveal a 32 per cent surge in average energy arrears among its clients seeking debt advice over the last two years, reports the Daily Record.
Simon Trevethick, head of communications at StepChange, said: “Not only will people find they are having to switch on their heating now as the weather turns colder, but bills are also set to go up this month, which is another blow to household finances. Energy arrears are the most common type of debt across household bills that we see at StepChange, and people have had little respite from steep costs over the past three years.”
“For anyone who is struggling or worried about energy bills, there is support available out there – contact your supplier, check to see if you’re eligible for any grants, and of course you can always get in touch with an organisation like StepChange.”
Which? Energy editor Emily Seymour said: “As we head into the colder weather, many households will be concerned that the energy price cap is going up by 2 per cent this week.
“There are several deals on the market for lower than the price cap, so now is a good time to shop around if you’re looking to fix. As a rule of thumb, we’d recommend looking for deals cheaper than the current price cap, not longer than 12 months and without significant exit fees. If you’re on a variable tariff, make sure to submit a meter reading to ensure you pay the cheaper rates for any energy used before the new price cap takes effect.”
The surge in energy bills comes despite wholesale prices dropping by 2 per cent over the three months leading up to Ofgem’s most recent price cap announcement. Nevertheless, standing charges – the daily fee consumers pay to have energy delivered to their properties – are poised to climb by 4 per cent for electricity and 14 per cent for gas, equating to 7p per day, chiefly due to the UK Government’s broadening of the Warm Home Discount scheme.
Approximately 2.7 million additional low-income households, encompassing 900,000 families with children, qualify for the £150 Warm Home Discount this winter, following the UK Government’s confirmation it would scrap the “hard to heat” eligibility requirements.
The Labour Government has stated the modification will result in an estimated 6.1m households receiving the discount this winter. Ofgem has stated that the latest hike was also fuelled by an increase in electricity balancing costs – these are costs incurred by network operators to ensure a stable electricity supply for when there is both an excess and a shortage of power in the system – adding around £1.23 a month to the average household bill.
Ofgem adjusts the price cap for households every three months, primarily based on the cost of energy on wholesale markets. The energy price cap, introduced by the Government in January 2019, sets a maximum price that energy suppliers can charge consumers in England, Scotland and Wales for each kilowatt hour (kWh) of energy they use.