Ofgem, the UK’s energy industry regulator, announced on 6th August 2021 that the energy price cap will rise by £139 to £1,277 a year for the typical home on 1st October 2021.
The regulator calculates the level of the cap based on energy supplier network costs along with the average overheads of each supplier and subsidies for renewable power. The level is reviewed based on wholesale energy costs every April and October, limiting the rates energy providers can charge for their tariffs at six-month intervals.
Compared to previous increases, this is the biggest rise yet. One of the reasons is because the costs incurred for UK energy providers to buy energy have increased by around 80% since the start of the year. Continue reading to learn more about the upcoming price hike and what it means for your household or business going forward.
Why the Price Hike?
There are a few reasons contributing to the upcoming energy price increase. For one, the impact of the COVID-19 pandemic, rising inflation and the end of the furlough scheme have all impacted people’s livelihoods across the length and breadth of the UK.
Not only that, but global prices for fossil fuels (especially gas) are increasing at a rate never seen before. According to Ofgem’s Chief Executive, Jonathan Brearley, this surge in prices will have a direct effect on customer’s energy bills.
Rising global fossil fuel prices are driving up inflation for consumers and have meant that the price cap will not cover fixed-rate energy tariffs.
The regulator’s price cap offers a safety net for customers who haven’t switched by making sure that suppliers only pass on legitimate costs, meaning people on default tariffs can save between £75-£100 a year as a result. Ofgem also said the price cap for default domestic energy deals would be raised to help cover additional supplier costs.
Is the price cap working?
When the energy price cap was introduced in January 2019, it was designed to protect customers against sky-high energy prices. But, as we’re seeing, the cap will rise to the highest it’s ever been this October.
The cap relates closely to an energy company’s default tariff. Typically, it impacts people who never or rarely switch energy providers or their current deal, which is why failing to shop around and compare prices can hurt your wallet in the long run.
With a high number of people predicted to continue working from home through the winter months, this jump in the price of energy bills might be an unwelcome pressure on top of other utility and maintenance costs for homes and businesses up and down the country.
The price cap is undeniably standardising prices across energy companies, but it’s making it harder for customers to find the lowest prices on their own. That’s where a comparison tool like Free Price Compare comes into play.
Why Switching Energy Providers is a Smart Move
Whether you’re a homeowner or business owner, and even if you’ve got plenty of options to choose from, it’s worth doing a bit of research to find the best tariff that meets your needs before the October price hike. When comparing, consider:
a flexible tariff that you’re not strictly tied to
an environmentally-friendly tariff
the cheapest tariff available to you
When done right, switching your energy provider is quick, easy and hassle-free. Compare your options today and see how much you can save on your home or business energy bills with Free Price Compare.
Advice For Switching Consumer Energy Providers
When one energy provider announces they’re increasing their tariffs, others often aren’t far behind. Keep an eye on the national news and watch your energy supplier’s movements so that you can prepare for potential price increases.
Use the summer months to compare your options to beat the October 1st deadline and get the best energy deal before the chilly winter months hit.
Recommendations For Switching Business Energy Providers
Switching your business energy supplier is often more complicated compared to switching your home energy supplier. A supplier will need to know details about your business size, energy usage and contract type before you can make the switch.
As a business owner, it’s not uncommon to find yourself on ‘rollover’ energy contracts, which can become costly if left unattended. We get it, you’d much rather get on with running your business and doing what you do best — but an easy-to-use comparison tool is guaranteed to make your life easier and protect your company budget from unnecessary overheads.
At Free Price Compare, We’re Cutting Costs for Households & Businesses
Sticking with the same supplier can lead to hiked rates of over 150% (or more!). The good news is that you can knock hundreds off your bills by making the switch with our free UK business energy comparison service.
Did you know that we also offer a price guarantee for businesses? We’ll beat your initial renewal energy quote or give you £1000 cashback.
Free Price Compare.com is a UK-based comparison service providing price comparison solutions for the home and business energy market. The service is completely FREE, INDEPENDENT and IMPARTIAL to ensure you find a cheaper price no matter what you’re searching for.
Compare today and see how much you can save on your energy bills:
Compare and see how much you can save on your energy bills