Ofgem’s energy price cap is set to rise by 13%
Millions of households have just days left to act in order to avoid higher energy bills, as experts warn that the biggest increase to the price cap since the energy crisis is due to come into force next week.
More than 18 million homes on standard variable tariffs will be affected when Ofgem’s energy price cap rises by 13% on July 1, according to analysis by comparison site Uswitch. The increase represents a potential £4 billion additional burden for households across Britain, prompting calls for consumers to explore whether switching to a fixed-rate deal before the deadline could save them money.
In theory, the 13% rise equates to an annual increase of £221. However, the immediate impact on household finances is likely to be less severe than the headline figure implies, as the increase falls during the summer months when most homes are using little or no gas central heating.
The £221 figure is based on annual energy consumption. In practice, many households may see their bills climb by only a few tens of pounds between July and September, with the greater concern being that elevated prices could still be in place when energy usage typically surges during the autumn and winter months.
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There are currently 27 fixed energy tariffs on the market that undercut the incoming July price cap, with the cheapest option offering potential savings of up to £284 a year compared with staying on a standard tariff. Ben Gallizzi, energy expert at Uswitch, said: “We’ve taken our message to UK towns, cities and the countryside to warn households of the urgency to take power into their own hands – you don’t have to accept rising energy prices.
“The price cap may be rocketing 13% in just seven days, but your bills don’t have to.
“The jump in energy rates might seem easier to bear in July while heating is off – but a graver concern is this setting the baseline for a further increase in October.
“If you haven’t switched in a while, you’re almost certainly on a standard tariff, and you will be impacted. Getting off a standard tariff and switching to a fixed deal should be an urgent priority for households.
“There are currently 27 fixed deals available that are cheaper than July’s price cap, with average savings of up to £284, so act now to ditch the price hike and save.”
Research commissioned by Uswitch revealed that 66% of bill-payers believe a 10% rise in energy costs would impact their finances. Some 17% said they would need to reduce spending on essentials such as food and transport, while one in 10 said they would have to draw from savings to meet the additional cost.
Energy switching hotspots
Data from Uswitch indicates Manchester residents are amongst the most proactive in searching for cheaper deals, followed by households in Walsall, Weston-super-Mare, Torquay and Llandudno. At the opposite end of the rankings, Milton Keynes was flagged as one of the least active areas for switching, along with Cwmbran, Carlisle, Handsworth in Birmingham and Altrincham.
How much could households save?
According to Uswitch, the cheapest fixed tariff currently on the market would see a typical household paying approximately £1,578 a year, compared with £1,862 under the July price cap.
Consumers are advised, however, to check exit fees and other terms and conditions before making the switch, as some of the lowest-priced tariffs carry penalties for leaving early.
With fewer than seven days until the price cap increase takes effect, households that have not reviewed their energy arrangements recently may wish to check whether they are on a standard variable tariff and weigh up available fixed deals before July 1.
