Energy prices are rising. Here’s what you need to know...

As I warned a few weeks ago, Ofgem, the energy regulator, has just announced the new energy price cap (the maximum price energy suppliers can charge for energy).

Sadly, it’s gone up significantly 😡

Here’s the lowdown on the new announcement...

What is the price cap?

In a nutshell, it's a limit on how much energy suppliers can charge you for:

• Each unit of gas and electricity you use
• The daily standing charge – what you pay for connecting your home to the gas/electricity supply.

So, it's designed to stop you being hit with excessively high charges.

The current price cap is £1,042 a year, based on average energy use. The new price cap, which comes into effect in April will be £1,138/year. So for the 11 million or so on a standard tariff, energy bills will be going up.

Remember, the price cap is a limit on the price of each unit, so if you use more than the average user, you'll pay more than £1,138/year. The big energy suppliers tend to set standard tariff prices at exactly the cap.

How will the new price cap affect me?

If you’re not already on a cheap fixed deal or your deal is coming up for renewal soon, you should urgently compare and switch.

➡️ Find a cheap energy deal

Why has the price cap gone up?

Ofgem, the energy regulator, sets the price cap. It looks at the costs firms incur when supplying energy, including the costs of wholesale energy, networks, environmental and social programme and tax.

As Ofgem doesn’t know what wholesale prices will be in the future, it looks at wholesale prices from the previous six months which have increased.

In addition to the usual factors Ofgem has made an allowance for the impact of coronavirus. Due to the financial difficulties people have faced, energy suppliers have more customers in debt, so Ofgem has made allowances for this in the price cap increase.

Prepay customer? Here’s what to do

Prepay customers are protected by a price cap too – the new level from April will go up from £1,070 to £1,156. But don’t rest on your laurels, there are still savings to be had from switching if you’re on a prepay meter. Many with average usage can save nearly £100. Use my energy comparison to find a new cheap deal.

I hope this is all useful to know and helps you save money 👊