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Uswitch warns a rise to the energy price cap by Ofgem, that would increase energy bill costs, could force millions of households into debt




Households are being told to prepare for a sharp rise in the cost of their energy bills if this Friday's change to the energy price cap goes ahead.

But there is a warning from comparison site Uswitch that the move, which would allow suppliers to charge certain customers more for their gas and electric, could also force about seven million households into debt because they will struggle to meet the hike in the cost of their bills.

The energy price cap which is overseen by regulator Ofgem, limits the amount suppliers can charge customers for their energy. It applies to people on either on the default standard variable energy tariff or those using pre-pay metres, which is estimated to be around three fifths of all households combined.

The price cap, designed to control energy bills, could be permitted to increase this Friday, August 6
The price cap, designed to control energy bills, could be permitted to increase this Friday, August 6

Because of rising wholesale energy costs and to help providers cope with missed customer payments caused by the pandemic, it is expected the price cap could be allowed to leap by 13% this Friday - which would push the average cost of an annual bill up by around £150 - the highest price rise in about 10 years.

In his online blog published at the end of July Ofgem chief executive Jonathan Brearley warned that changes in the price of fossil fuels was likely to hit customer pockets.

He wrote: "I know that the last 18 months have been tough for many households as a result of the COVID-19 crisis. Rising inflation and the forthcoming end of the furlough scheme on top of the impact that the pandemic has had on people’s livelihoods means that family finances are tight now.

"Unfortunately, against this backdrop I am today alerting customers that global prices for fossil fuels, especially gas, are increasing at an unprecedented rate. Ultimately this will feed into all customer energy bills in the UK".

More than 12 million households would be affected by any increase with around seven million, says Uswitch, facing debt
More than 12 million households would be affected by any increase with around seven million, says Uswitch, facing debt

Uswitch says any increase of more than £10 a month could risk driving a quarter of bill payers into debt, with those on lower incomes likely to be most affected by the price cap being allowed to rise significantly.

It is suggesting, where possible, that households look at switching their provider if a rise on Friday (August 6) is announced.

Justina Miltienyte, energy policy expert at Uswitch.com, said: “Many people are already in a risky position financially, and it’s worrying that an increase of £10 per month in energy bills could push a quarter of households into debt.

“Unfortunately those very circumstances are likely to happen this week as Ofgem announces the increase in the default tariff price cap.

“People on SVTs will be directly affected by any increase in the price cap but it is possible to get protection from this market volatility and reduce your bills, by switching to a cheaper fixed deal.”



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