Energy bills for millions rise to record high as price cap takes effect

ITV News Consumer Editor Chris Choi reports on how households bracing for winter are steadying themselves for the biggest rise to energy costs since the price cap began

Millions of people face huge rises in their energy bills as the UK's energy regulator's latest price cap comes into force amid soaring wholesale prices.

Bills will increase by at least £139 - a record high - for about 15 million households due to a rise in wholesale prices, Ofgem said.

Energy customers on default tariffs who pay by direct debit have seen the sharpest jump in prices since the cap was introduced in January 2019, taking average bills to £1,277.

Pre-payment customers will see costs rise by £153, from £1,156 to £1,309.

The increase has been driven by a rise of more than 50% in energy costs over the last six months, with gas prices hitting a record high as inflation jumped amid the easing of pandemic restrictions.

The latest cap, announced in August, was determined before further unprecedented increases in global prices, which has seen nine small UK suppliers collapse since the start of September.

  • What is the price cap?

Regulator Ofgem sets its default energy price cap every six months; from 1 October 2021 this will be set at £1,277 which is calculated for an average household’s energy consumptionThe price cap is not how much your bills will be capped at - you will pay if you're on an standard variable tariff - use more energy, and you'll pay more.

  • Why will the cap increase charges?

Ofgem's cap applies to the price your supplier charges for each unit (kWh) of electricity and gas used, and your standing charge. So, from 1 October, energy companies can charge you more for your gas and electricity consumption.

  • How much extra will I pay?

The latest rise will see prices increase by at least £139 - a record high. Energy customers on default tariffs who pay by direct debit have seen the sharpest jump in prices since the cap was introduced in January 2019, taking average bills to £1,277.

Pre-payment customers will see costs rise by £153, from £1,156 to £1,309.

Energy suppliers are required to price below that cap but most set their prices a couple of pounds below the cap level.

Energy watchdog Citizens Advice warns people will face “desperate choices” this winter with customers of the five largest failed suppliers set to pay £6.70 more a week when they moved on to the default tariffs of a replacement firm.

Although households that shop around and sign up to fixed plans with suppliers are not subject to the price cap, the recent rise in wholesale costs have seen companies hiking their fixed plan fees significantly above the cap to deter people.

Will the price cap go up again?

The regulator reviews the price cap once every six months, and changes it based on the cost suppliers have to pay for their energy, cost of policies and operating costs, among other things.

In further bad news for energy customers, research agency Cornwall Insight has already predicted that Ofgem’s next price cap will rise by £178 from April.

The new energy cap comes after the cost of gas on wholesale markets rocketed at unprecedented rates, up 70% since August and 250% since the beginning of the year, according to trade body Oil & Gas UK.

Adam Scorer, chief executive at fuel poverty charity National Energy Action, said: “The massive devastating increases in energy prices will drive over 500,000 more households into fuel poverty, leaving them unable to heat or power their homes.

Energy prices could rise by 30% next year. Credit: PA

“Just when they were needed most, the uplifts to Universal Credit are also being withdrawn and inflation is soaring. The new Household Support Fund will provide some welcome support for those who can access it, but on its own it is not enough to halt the erosion in incomes and deal with rising prices.

“Without a wider package of support – keeping Universal Credit uplifts and more rebates to protect those on the lowest incomes from spiralling energy prices – vulnerable people are still at dire risk of premature death this winter.”

The End Poverty Coalition warned fuel poverty could become “endemic” in the UK and published a map showing the worst affected places in England.

It said the number of households in fuel poverty could rise from 4.1 million to 5.3 million.

The worst place in England for fuel poverty is Barking and Dagenham, followed by Stoke-on-Trent and Newham, according to the coalition.

Meanwhile Bracknell Forest, Runnymede and East Hampshire are among the areas least affected by fuel poverty.

The coalition – which includes Age UK, Fuel Poverty Action Group, Unison and Generation Rent – has launched a petition calling on the government to take immediate action to avert the fuel poverty crisis this winter.