RECORD INCREASES in global gas prices sees energy price cap rise of 54% from 1st April 2022. Ofgem has announced the energy price cap will increase by £693 from April 2022. The increase is driven by a record rise in global gas prices over the last 6 months, with wholesale prices quadrupling in the last year.
What is a price cap?
A price cap tracks wholesale energy and other costs. It stops energy companies from making excessive profits, ensuring customers pay no more than a fair price for their energy. The price cap allows energy companies to pass on all reasonable costs to customers, including increases in the cost of buying gas.
Under the price cap mechanism, energy companies will be allowed to pass on these higher costs from April when the new level takes effect. This is because energy companies cannot afford to supply electricity and gas to their customers for less than they have paid for it.
Over the last year, 29 energy companies have exited the market or been put in administration in the wake of soaring global gas prices (Ofgem website).
Who will be affected?
- Default tariff customers who haven’t switched to a fixed deal
- Those who remain with their new supplier after their previous supplier exited the market
- Prepayment customers.
Government support announced
Yesterday the government launched a package of support for households. The chancellor said help of £350 per household would take the "sting" out of the rise.
- There will be a rebate of £200 to all households, however this will be paid back to energy suppliers at £40 per year.
- There will be a £150 council tax rebate for those households in bands A to D.
- Warm Homes discount will continue to be paid automatically via DWP, £140 per year for those on pension credit or on low incomes. Ofgem expect more households to be eligible.
- £150 million will be disbursed through Local Authorities possibly via a household support fund. This will be one-off funding for vulnerable households, however further details are not available at this time.
- The winter fuel payment and cold weather payment will still be available.
We suggest people take a meter reading as of the 31st March 2022 and submit to their energy companies to ensure that energy used up to the end of March is via the lower rate.