Millions of households in Great Britain are facing higher bills for gas and electricity from Friday, after a 12% increase in the cap on prices energy providers can charge for variable rate tariffs.
The regulator, Ofgem, announced in the summer that the cap would go up after a steep rise in wholesale gas prices. Providers are allowed to charge less, but customers who are not on fixed-price deals are expected to be hit with the full increase.
Charities have warned that the rise, which comes at a time when the market is in crisis and competitive deals have been pulled, will push more households into fuel poverty.
The limit on the unit price of gas and electricity is different around Britain, and varies according to how customers pay their bills, but for an average dual fuel customer paying by direct debit, Ofgem said it would mean bills of £1,277 a year – £139 more than under the old cap.
For 4 million pre-payment customers, who are typically the most vulnerable and on low incomes, the cap has risen by the equivalent of £153 a year to £1,309 for an average duel fuel household.
The rises for consumers come as many are being switched to new suppliers after the collapse of several small utility firms.
The firms that have gone bust were offering some of the cheapest deals on the market, and their customers face being moved on to a higher standard variable tariff.
According to the charity Citizens Advice, these customers will typically experience a £30 a month increase in their bills.
Figures from Ofgem show that 1.6m electricity and 1.2m gas accounts were in arrears at the end of July, and that in about half of cases there was no repayment plan in place.
Among customers who are behind on bills and do not have a plan in place, the average debt had increased in each of the past four quarters, and by the end of July stood at £834 for electricity and £660 for gas.
Anita Dougall, the chief executive of Sagacity, a data firm that works with energy providers, said the figures “provide a taste of things to come, as the number of people struggling to pay their energy bills is going to shoot up this winter … This means it will be more important than ever before for energy companies to deliver on their responsibility to support vulnerable customers.”
The debt charity Christians Against Poverty said that even before the pandemic more than half of its clients could not use the energy they wanted without worrying about the cost.
CAP’s energy manager, Paul Walmsley, said: “We sadly expect this situation to make things even harder and leave a lot more people losing sleep because of their rising energy bills.
“We need more solid guarantees from Ofgem around the protections they can give customers in vulnerable circumstances. There are too many unknowns for those who cannot cope without support, so more reassurance is needed where possible.”
Walmsley said the removal of the £20 universal credit uplift was coming at the worst possible time.
“If customers can afford to pay their bills then that helps protect energy companies from damage too, but taking away the universal credit lifeline will leave many struggling to avoid falling into energy arrears,” he said.
On Friday morning, the price comparison website uSwitch put adverts in the national press telling consumers that they would be wise to stick with their existing supplier as there were no good offers elsewhere.
“It’s probably not time u switch (your energy right now),” the adverts advised. “For most people, energy suppliers can’t offer much in the way of cheaper deals right now.”