Households confront escalating energy costs following Ofgem's recommendation to secure most favorable rates
The energy price cap, which determines the maximum amount energy suppliers can charge households for their gas and electricity, is set to increase in April, according to the energy regulator, Ofgem. The predicted price cap for April is £1,785 a year for a typical dual fuel consumer, nearly a 3% increase from January.
This increase comes as the choice of fixed energy tariffs on the market has grown, giving customers more opportunities to shop around for the best deals. Tim Jarvis, director general of markets at Ofgem, has advised customers to take advantage of this choice and to speak to their supplier if they are struggling with bills.
The new price cap represents a significant increase compared to the energy crisis in January-March 2023, when the cap was at its peak, costing £2,321. However, it is still 10% cheaper compared to January-March 2024, costing £1,928.
While the new price cap is a relief compared to the height of the energy crisis, it remains about 51% higher than it was in 2021. This means households are still paying significantly more than before the crisis began.
Dr Craig Lowrey, Principal Consultant at Cornwall Insight, has predicted the increase would be "disappointing" to households. However, he also emphasised the importance of policymakers and industry stakeholders working together to ensure fair and sustainable energy pricing for households.
In recent months, around 1.5 million households have switched tariff, according to analysis by the energy watchdog. This highlights the importance of customers shopping around to make sure they are on the best, most affordable deal for them.
The turbulence in wholesale markets could cause the prediction to increase or decrease several times before the April cap is set. Ofgem has proposed forcing energy suppliers to offer a low or no standing charge option, which could help some customers save up to £140 by switching to a better deal on the market.
However, while some customers with lower energy usage may benefit from a lower standing charge, these tariffs can have a higher unit rate, meaning some could be worse off. Customers are therefore advised to carefully consider their energy usage patterns before making a switch.
The next energy price cap will be announced later this month and take effect on April 1. The security of energy supply and Ofgem's evolving policies will shape the trajectory of bills as we move into 2025 and beyond. It is essential for customers to stay informed and take advantage of the choices available to them to manage their energy costs effectively.
- The growth in the number of fixed energy tariffs within the industry presents an opportunity for households to manage their personal-finance, providing them with the ability to shop around for the most affordable deals.
- The increase in energy tariffs has led to concerns among financial analysts, with Dr Craig Lowrey predicting it will be "disappointing" for households trying to budget their personal-finance.
- As the energy price cap continues to evolve, the finance sector will play a crucial role in ensuring fair and sustainable energy pricing for households, particularly during periods of turbulence in the industry and wholesale markets.
