Millions see energy bills rise by at least £139 as Ofgem raises price cap | Business news

[ad_1]

About 15 million households will see their energy bills rise by at least £139 after a regulator raised the price ceiling with a record increase.

The sharp 12% rise, which will affect half the population, is driven by a more than 50% boom in wholesale fuel costs over the past six months with gas prices at a record high as global economies recover from the COVID-19 crisis, according to Ofgem.

From October, energy customers who pay the default fee by direct debit will see an increase of £139 from £1,138 to £1,277.

Prepaid customers will see costs rise by £153, from £1.156 to £1309.

Image: Record gas prices as the world emerges from lockdown have been blamed for raising the energy ceiling

Soaring global fuel prices are already driving up inflation for consumers, making fixed-price energy tariffs, which are usually of better value but not covered by the price cap, more expensive.

Even before the spike, Ofgem moved to alert families still reeling from the impact of the coronavirus pandemic.

Activists also said the increase “comes at the worst possible time” and warned it would push an additional 488,000 families into fuel poverty, with more than four million people already behind on their home bills.

The increase will coincide with the end of the Job Support Leave Scheme and the £20-a-week temporary boost in benefits.

In response to the rate cap announcement, Welsh Labor leader Mark Druckford made a direct appeal to the chancellor not to remove the global credit hike.

Speaking to Sky News, Ofgem CEO Jonathan Brierley said: “We know how difficult this is for many customers, but what we can’t do is ask companies to sell their energy for less than they buy it for.

“But there is a great deal of help and support available.”

Please use Chrome browser for an accessible video player

Wales leader appeals for help with energy bills

Frequently pressed on whether the move would force some families into fuel poverty, he said, “We accept that this will change the circumstances of the families, so yes we accept that this will be difficult for many families.

“Families need to make sure they have access to the support and advice that is available.”

Ofgem reviews and changes the price cap every six months.

Energy suppliers are required to price below the permissible limit, with most prices set at less than a few pounds.

Price ceilings are supposed to provide a safety net for customers by ensuring that suppliers pass on only legitimate costs.

According to Ofgem, those who are subject to the default tariffs save an estimated £75 to £100 each year.

People who are concerned about paying their bills are advised to contact their suppliers about available support or shop before the increase takes effect.

But Simon Francis of the Fuel Poverty Eradication Alliance said: “This unprecedented rise in energy bills is coming at the worst possible time for millions of families across the country.

“Switching advice and a price cap may provide some protection against the worst excesses of the energy market, but this will not be a relief to those who are now faced with the difficult choice between heating and dining.”

Analysis: Helen Ann Smith, business reporter

The reason for this rise is simply that wholesale prices for energy have skyrocketed, with coal prices soaring, and gas now at record levels.

Prices had already plummeted at the start of the pandemic as the world stayed home and demand plummeted.

But since then there has been a shortage of natural gas production, a sudden increase in demand after the pandemic and some domestic problems that have disrupted energy supplies; Droughts in China and floods in Indonesia, to name a few.

Add to those months of pandemic-related delays and disruptions at every stage of the supply chain and you have what some analysts have called a “perfect storm” driving commodity prices higher.

This high value of the goods we are theoretically supposed to stay away from is certainly noteworthy.

For example, the price of Australian high-energy coal, which is used as a benchmark for the Asian market, rose to the highest level since September 2008.

It tells us that disruption in the fossil fuel market could have such an impact on consumer bills – the truth is that renewables aren’t there to fill the gaps yet.

In 2020, renewables generated 43% of the UK’s electricity while fossil fuels still provided 38.5%.

There is no doubt that wind and solar power facilities are expanding rapidly but the truth is that they are far from providing a safety net for disruption in the fossil fuel market, and our dependence on dirty fuels remains deeply entrenched.

Read more from Helen Ann

Caroline Abrahams, director of charity organizations at Age UK, said: “The level at which energy prices are set is of great importance to older people, because we know they are less likely to switch providers for a better deal – especially if they are not online, which is the case for around Half of the population is over 75 years old.

“For all of those who are effectively hanging on to their current tariffs, their best protection against unfair and unaffordable fuel bills is to cap energy prices.

“Unfortunately, the fact that the hat is going to go up so much this year will set them up for a miserable and anxious winter.”

Photo: Some pensioners face ‘miserable, anxious winter’, warns Age UK

“This price hike could create a perfect storm for families this fall, hitting people at the same time as the global credit cut and the end of vacation,” said James Plunkett of Citizens Advice.

Emma Pinchbeck, chief executive of Energy UK, said: “We know this price hike will come at a difficult time for many customers who may already be facing financial challenges.

“Any customers concerned about bills should contact their supplier so they can see what assistance may be available.”

Image: Activists say the increase ‘comes at the worst possible time’

Referring to rising wholesale prices, she added: “Ofgem sets the maximum price at a level that is fair to customers, but it also needs to reflect when suppliers face increased costs to allow them to continue operating in a market where most service providers make little or no profit. Present.”

The increase comes as energy deals hit their highest cost in more than two years, according to data from Market Comparison.

The average price for one of the cheapest deals on the market is currently £996, the highest since February 2019.

[ad_2]