The energy regulator, Ofgem, has announced that the price cap for customers on default tariffs will increase by £117–£1254 per year from 1 April for the six-month “summer” price cap period. The price cap for prepayment meter customers will increase by £106–£1242 per year for the same period.
The price cap was introduced in January 2019 as a way of ensuring that consumers paid a fairer price for their gas and electricity. At the time Ofgem estimated that the new cap on the prices charged by suppliers would save 11 million people an average of £76 a year. Ofgem also stated that they would carry out a review of the cap during February. Later in the year they will reset the level of the cap in August for the six-month winter price cap period which begins in October.
The cap applies to households in England, Scotland and Wales on default tariffs — such as standard variable tariffs.
Ofgem explained that the current increase is due primarily to higher wholesale costs which have pushed up the underlying cost of energy. The regulator promised that when costs come down the cap will be reduced again to ensure that any reduction is passed onto the consumer.
Other costs, including network prices for transporting electricity and gas to homes and expenses associated with environmental and social schemes, have also risen and contributed to the increase in the level of the caps.
Announcing the increase, Dermot Nolan, Chief Executive of Ofgem, said:
“Under the caps, households on default tariffs are protected and will always pay a fair price for their energy, even though the levels will increase from 1 April.
“We can assure these customers that they remain protected from being overcharged for their energy and that these increases are only due to actual rises in energy costs, rather than excess charges from supplier profiteering.”
For the Government, Energy and Clean Growth Minister, Claire Perry stated:
“As Ofgem has said, these increases reflect the sharp rise in gas and electricity costs. The cap is designed to ensure energy companies offer good value to their customers and continue to thrive as an efficient business.
“We were clear when we introduced the cap that prices can go up but also down. The key thing is that as a result of the cap, 11 million households on standard variable tariffs will be £75–£100 better off and energy suppliers will no longer be able to rip off customers on poor value tariffs.
“With over 60 companies and more than 200 tariffs to choose from, consumers can always shop around for a cheaper deal and make big savings by switching.”
The updated caps are set out on the Ofgem website.
Last reviewed 15 February 2019