Millions of households will pay more for their electricity and gas from 1 April unless they switch away from expensive standard variable rate (SVR) or ‘default’ tariffs.
Bills will increase in line with industry regulator Ofgem’s new energy price cap, which dictates the maximum amount per year an energy provider can charge customers on these tariffs.
This Thursday, 1 April, the cap will rise as follows:
- typical prices will increase by £96 per year from £1,042 per year to £1,138 per year for customers who are on a default/SVT tariff (estimated 11 million households)
- typical prices will increase by £87 per year from £1,069 per year to £1,156 per year for pre-pay customers (estimated four million households).
The figures quoted are for typical families – the actual level of the cap and the size of bills received will vary according to usage.
Most energy suppliers have already announced increases in their standard variable rate or ‘default’ tariff prices, and most are raising their prices to the maximum permitted by the cap.
Related: Compare Energy Tariffs & Save up to £497*
Households that have not switched for two or more years or which have never switched are likely to be on default variable rate tariffs.
Fixed rate alternative
The cheaper alternative to a variable rate tariff is usually a fixed-rate deal, where the price per unit of energy is locked in for a fixed period – normally 12 or 24 months.
Ofgem says the bulk of the increase in the price cap is due to the rising cost of energy on wholesale markets coupled with high winter demand.
Provision has also been made for losses incurred by providers who have suffered bad debts as a result of customers not being able to pay their bills because of the impact of coronavirus.
Ofgem updates its price cap twice a year to reflect changing market conditions. The 1 April change is notified in February. We will hear in August where the price cap will stand on 1 October.
Related: Compare Energy Tariffs & Save up to £497*
*£497 is the minimum savings of the top 10% of savers who switched via our partner of choice energyhelpline in the period between 1st Nov 2019 and 30th April 2020.