‘Energy price rises’ is a nightmare phrase for everyone (except the energy companies, of course). The last thing you want to hear after a long week is that more of your hard-earned money is going to be spent paying for the energy in your home.
We hate to be the bearer of bad news but… The ‘big six’ suppliers have now all announced energy price rises of around 10 per cent, as a result of Ofgem increasing the price cap on 1 April.
The energy price cap actually came from a good place. In 2018, the government said customers were being overcharged for gas and electricity. Prime Minister Theresa May had called the tariffs a “rip-off”. Here at WeFlip, we’ve been banging this drum for a while, so it was extremely positive to see lawmakers get involved and tell Ofgem to set a limit. But it now appears to have backfired.
So, what is the energy price cap?
It’s a cap on the price that individuals pay for energy if they’re on a “standard variable” energy tariff or a tariff they haven’t chosen – known as a “default tariff”. This usually happens when the big energy companies move their customers on to expensive rates when their cheap fixed tariffs or introductory offers end. Annoying, we know.
Ofgem hoped that customers on default tariffs would save around £76 on average and as much as £120 for those on the most expensive tariffs, the idea being the price cap would remove around £1 billion worth of overcharging for consumers’ bills. That’s a hell of a lot of savings for the UK public.
It was a nice idea. But the big six – E.ON, EDF Energy, npower, ScottishPower, SSE and British Gas – immediately set their rates right up to the maximum allowed by the cap. Blow one.
Ofgem committed to reviewing the cap twice a year, effective in April and October, and were forced to raise the cap by 10.3 per cent in April 2019 to reflect the higher costs for energy suppliers due to wholesale prices, limited supply and economic uncertainty. Blow two.
Many suppliers reacted to this by announcing price rises when the cap came into effect, meaning the standard tariff prices were now higher than before the cap. Blow three.
So a good idea has turned sour. Although it’s not all bad news. Some smaller, independent energy suppliers are fighting back, refusing to raise their prices in line with the cap by relying on app-based technology and other steps to reduce costs. We believe you need to regularly flip providers with WeFlip to get great gas and electricity deals now and forever.
Will energy prices go up after Brexit?
Now we’re about to break the golden rule of good conversation and mention Brexit, so please accept our deepest apologies.
Research from University College London claims customers paid £75 more on average in the year after the EU referendum for gas and electricity. And a hard Brexit could lead to a further average rise of £61 per year in the event of the pound sterling falling further against the euro and the US dollar.
It all adds up to a pretty disastrous scenario for customers. Essentially energy price cap + Brexit = energy price rises.
What else affects energy prices?
Aside from the energy price cap and concerns around Brexit, there are a range of other factors that affect the price of gas and electricity in the UK such as supply and demand, the weather, availability, wholesale costs, transport costs and infrastructure maintenance.
Even things like conflicts and natural disasters in countries that produce gas or oil can affect the price we pay here in the UK. We saw wholesale gas prices in the UK spike when supplies in Ukraine, Iraq and Syria were being threatened in recent years. It makes sense that the government got involved, then. It’s just a shame it hasn’t worked out quite to plan.
Are energy prices expected to rise in 2019?
It’s looking that way. They’ve already risen and with Brexit on the horizon prices could bump up yet again. There isn’t much you or I can do about it. Would people have voted differently in the referendum if they knew how it would affect energy prices? Actually, let’s not get into that, sorry.
The two things you can do to save money on your energy bills are to limit the energy you use in your house and ensure you’re on the best electricity deal and best gas deal possible.
Tips to save on energy
- Turn off standby appliances
- Install a smart thermostat
- Turn down your thermostat
- Buy efficient appliances
- Install a new boiler
- Wash clothes at a lower temperature
- Be smarter about water
- Invest in double glazing
- Draught-proof your property
- Insulate the roof
- Monitor your usage
Switch energy supplier
Getting into the habit of energy saving is key, but it’s not much use unless you’re on one of the best energy tariffs available.
Let WeFlip do the heavy lifting and save you up to £350 a year by switching supplier. Given today’s energy market, it’s the least we can do. It only takes three minutes.