Changes to the energy price cap mean that millions of households on standard tariffs will face a hike of almost £100 in their gas and electricity bills from April 1.
In early February, it was announced that costs will go up by an average of £96 per year for many consumers.
According to regulator Ofgem, which sets the price cap, the rise is due to a big increase in wholesale costs (the amount suppliers pay for gas and electricity). These costs have shot up after bottoming out due to low usage in the first wave of Covid-19.
While higher energy bills will be a worry for many consumers whose finances have already been hit hard due to the pandemic, the good news is, most households can make big savings – of £306* a year – by switching ahead of the hike.
Here we take a closer look.
What is the price cap?
The aim of the price cap, which applies to standard tariffs, is to limit the maximum price a supplier can charge per unit of gas and electricity.
A standard tariff is the type of tariff which you automatically move onto once your fixed deal with an energy company comes to an end. Typically, it is a provider’s most expensive type of tariff. So, if you don’t switch, you will be stuck paying the higher price.
From April 1, the price cap for standard tariffs is due to go up from £1,042 per year to £1,138 per year. This will affect 11 million default tariff customers, according to Ofgem. (The regulator also points out that the price cap is due to increase by £87 to £1,156 for pre-payment meter customers, affecting four million customers).
The cap is reviewed twice a year, depending on wholesale prices, and changes take effect in April and October.
What are providers doing?
Providers often increase the price of their standard tariffs in line with the cap.
In fact, major suppliers including British Gas, EDF, Eon and Scottish Power have already confirmed their prices will rise from the start of April and customers have started to be notified of the increases. Average increases will be around £96 per year.
How do I know if I’m on a standard tariff?
If you’ve never switched energy provider, or last switched more than 12 months ago, there’s a good chance you are on a standard or default tariff. You’ll be able to find which tariff you’re on on your latest bill.
Don’t rely on the price cap to get you a good deal
It’s important not to assume that the price cap will protect you from price hikes or give you a ‘good’ deal on your energy bills. If you’re on a standard or default tariff, it’s likely you’re overpaying.
Significant savings could be up for grabs by switching to a cheaper fixed deal.
You need to take action
As a consumer on a standard tariff, you need to be proactive and take steps now to compare energy prices ahead of the new price cap kicking in on April 1.
Here at MoneySuperMarket we have found there are currently around 80 tariffs cheaper than the £1,138 cap.
Compared to the new price cap, MoneySuperMarket’s cheapest tariff is currently £949.** This means that if you rely on the price cap, you’ll be paying at least £189 more for your energy on average.
To avoid paying over the odds, you need to shop around and make a switch.
How easy is it to switch?
Finding a cheaper energy tariff is straightforward, and should only take a few minutes of your time.
You simply need to type in your postcode and a few details about your energy usage.
MoneySuperMarket will then scour the market to find the best deals for you – including those from the Big Six, as well as smaller suppliers, and ‘green’ energy providers. (There are now a host of competitively-priced green deals to choose from, and some are among the very cheapest tariffs on the market).
Once you’ve found the deal you want, you just need to click through to the provider’s website to finalise your choice. There will be no exit fees to pay for leaving a default tariff.
Will my service be disrupted?
Under what is known as the ‘Energy Switch Guarantee,’ your new supplier will take care of all the details.
You won’t experience any interruption to your service, and should be on your new tariff within 21 days.
Review your options every year
Having made the switch, you can’t afford to sit back and forget about your energy bills altogether.
Energy Monitor is the easy way to stay on top of your bills. When you run a quote with us, you’ll be able to sign up for alerts when a saving can be made. We’ll keep an eye on the prices and let you know when to switch and when to stay, so you’ll never overpay again.
Where to turn for help
If you are struggling to pay your energy bills, there’s lots of help and information available on Ofgem’s website.
Take steps to cut energy costs
Finally, the arrival of spring is a good time to ‘spring-clean’ your energy habits.
With this in mind, as well as switching to a cheaper deal, now is also a good time to take steps to save energy around the home.
For tips on how to be more energy efficient as the weather gets warmer and the days get lighter head here.
*30% of consumers that applied to switch via MoneySuperMarket saved at least £306.38, March-December 2020. Excludes NI, CI & IOM.
**MoneySuperMarket tariffs as at February 5, 2021