{"id":105156,"date":"2022-02-04T15:58:13","date_gmt":"2022-02-04T15:58:13","guid":{"rendered":"https:\/\/www.pbctoday.co.uk\/news\/?p=105156"},"modified":"2022-02-04T15:58:13","modified_gmt":"2022-02-04T15:58:13","slug":"energy-price-cap","status":"publish","type":"post","link":"https:\/\/www.pbctoday.co.uk\/news\/energy-news\/energy-price-cap\/105156\/","title":{"rendered":"Energy price cap to increase by \u00a3693 from April"},"content":{"rendered":"

The energy price cap will increase from 1 April for approximately 22 million customers. It has been driven by a record rise in global gas prices over the last 6 months<\/h2>\n

A record increase in global gas prices will see the energy price cap rise by 54% from 1 April affecting approximately 22 million customers. Those on default tariffs paying by direct debit will see an increase of \u00a3693 from \u00a31,277 to \u00a31,971 per year (difference due to rounding). Prepayment customers will see an increase of \u00a3708 from \u00a31,309 to \u00a32,017.<\/p>\n

Ofgem<\/a> acknowledges that the price increase will be extremely worrying for many customers<\/a> and encourages customers struggling to pay their energy bills to contact their suppliers.<\/p>\n

Why is the energy price cap increasing?<\/h3>\n

The increase is driven by a record rise in global gas prices over the last 6 months, with wholesale prices quadrupling in the last year. Customers who haven\u2019t switched to a fixed deal and those who remain with their new supplier after their previous supplier exited the market will be affected.<\/p>\n

The price cap is updated twice a year and tracks wholesale energy and other costs. It prevents energy companies from making excessive profits and ensures that customers pay no more than a fair price for their energy. The price cap allows energy companies to pass on all reasonable costs to customers, including increases in the cost of buying gas.<\/p>\n

The cap was last updated in August but the current level does not reflect the unprecedented record rise in gas prices which has since taken place. Under the price cap mechanism, energy companies will be allowed to pass on these higher costs from April. This is because energy companies cannot afford to supply electricity and gas to their customers for less than they have paid for it.<\/p>\n

Over the last year, 29 energy companies have exited the market or been put in special administration in the wake of soaring global gas prices – this has affected around 4.3 million domestic customers.<\/p>\n

‘Ofgem will ensure energy companies support their customers’<\/h3>\n

Jonathan Brearley, chief executive of Ofgem, said:<\/p>\n

\u201cWe know this rise will be extremely worrying for many people, especially those who are struggling to make ends meet<\/a>, and Ofgem will ensure energy companies support their customers in any way they can.<\/p>\n

\u201cThe energy market has faced a huge challenge due to the unprecedented increase in global gas prices, a once in a 30-year event, and Ofgem\u2019s role as energy regulator is to ensure that, under the price cap, energy companies can only charge a fair price based on the true cost of supplying electricity and gas.<\/p>\n

\u201cOfgem is working to stabilise the market and over the longer term to diversify our sources of energy which will help protect customers from similar price shocks in the future.\u201d<\/p>\n

Ofgem will announce further measures to help the energy market weather future volatility. It will do this by increasing financial resilience and ensuring that they have the flexibility to respond so that risks are not inappropriately passed on to consumers. This follows measures<\/a>\u00a0announced in December.<\/p>\n

The further measures include enabling Ofgem to update the price cap more frequently than once every 6 months in exceptional circumstances to ensure that it still reflects the true cost of supplying energy.<\/p>\n

Government intervention may be necessary<\/h3>\n

Paul Richards, group director of customer and communities at Orbit, added:<\/p>\n

\u201cThe current increases in energy prices is having a widespread impact onto people\u2019s day to day lives, especially for those in low income households. A research report we published with the Chartered Institute of Housing revealed that 25% of our customers have gone without heating in the past 12 months to save money, while 60% said they were paying more than 10% of their income on energy costs, highlighting the financial pressure of rising energy prices.<\/p>\n

“While they continue to increase, more households will have to make difficult decisions on how they pay for their basic living needs. Whilst at Orbit we are doing everything we can to improve the thermal efficiency of our homes and support our customers, we would urge the government to go further to protect those most impacted by these increases.\u201d<\/p>\n

‘We need a coherent plan to tackle this national crisis’<\/h3>\n

Ahead of this announcement, Simon McWhirter, director of communications, policy & places at UKGBC, commented:<\/p>\n

“The price cap rise will be devastating for millions of households, particularly in vulnerable and left-behind communities. The Government is right to provide immediate financial support, especially for low-income households, but this will fall well short of what\u2019s really needed, if it doesn\u2019t also simultaneously help the UK\u2019s 29 million households insulate their homes and end their reliance on gas.<\/p>\n

“The UK has one of the leakiest and draughtiest building stocks in Europe. Poorly insulated homes compounded with rising energy costs have created the perfect storm for households in the UK. Government must translate this moment of crisis into a moment of action and launch a national home retrofit programme to upgrade and insulate every home, as well as bring forward the cut-off date for the sale of gas boilers from 2035 to 2030.<\/p>\n

“UKGBC is calling on the Government to, at a minimum, immediately fulfil its outstanding Manifesto commitments to spend the remaining \u00a31.6bn dedicated to insulating low-income homes. It must not bend to pressure and cut the Energy Company Obligation (ECO). The \u00a31bn a year programme is crucial for insulating low-income homes and protecting the people most at-risk from rising energy prices in the future.<\/p>\n

“We need a coherent plan to tackle this national crisis, and so Government should also come forward with a successor to the failed Green Homes Grant voucher scheme. There is currently no support for most homeowners to improve the energy efficiency of their homes.”<\/p>\n

\n

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