“Energy price cap is no longer fit for purpose”

The energy sector has reacted to the anticipated price cap increase, highlighting that this will coincide with a challenging period for households

As reports circulate about a projected 5% rise in the January to March 2024 default tariff cap, the energy industry is expressing concerns about the timing of this increase.

Energy consultancy Cornwall Insight forecasts that the typical dual fuel household could see their energy costs climb to £1,931, up from the current cap of £1,834.

This rise is attributed to geopolitical uncertainties affecting the wholesale market, including disruptions to the Finnish Balticconnector, the Israel-Hamas conflict and industrial action in Australian gas production facilities.

Simon Francis, Coordinator of the End Fuel Poverty Coalition within the Warm This Winter campaign, expressed concern about the impending rise in energy bills on 1st January 2024.

Mr Francis said: “Energy bills will go up on 1 January 2024 at the worst possible time for struggling households.

“If the government thinks that people will be able to get through this winter without more support for their energy bills, then they are living in cloud cuckoo land. We need to see the Chancellor introduce an Emergency Energy Tariff for vulnerable households and a Help To Repay scheme for those in energy debt.

“Even in winter 2024/25, energy bills will be 79% higher than in winter 2020/21. Record prices are here to stay and the government needs to take action to help people stay warm this winter and every winter through increased support for insulation and renewables.”

Richard Neudegg, Director of Regulation at Uswitch, commented: “A week ahead of the price cap announcement, this is a firm prediction that energy costs will rise by 5% for households on standard variable tariffs in January.

“This price rise will come at the worst time of year for households, who will be using more energy at home during one of the coldest points of the winter.

“Consumers on standard variable tariffs are particularly exposed to fluctuations in the wholesale energy market, as the price cap now changes every three months.

“This quarterly price change is piling extra financial uncertainty on consumers, as it’s challenging to budget for a bill when rates can change so frequently.

“Fixed rate deals remain the only way that consumers can secure any certainty about what they will pay for energy for a year.

“Yet more still needs to be done by Ofgem to encourage suppliers to offer fixed deals more widely and at more competitive prices.

“The price cap is no longer fit for purpose, and the system needs reforming to create a more competitive market, which also protects households.”

Emily Seymour, Which? Energy Editor, said: “As we head into colder weather, many households will understandably be worried to hear that energy prices will likely increase from January.

“If you are concerned about struggling to pay higher bills, don’t suffer in silence – there is help available. Speak to your energy provider about a payment plan you can afford and check to see if you qualify for any government schemes.

“We’d recommend that everyone without a smart meter takes a meter reading on or close to 31st December to make sure they don’t overpay for any energy used before the new price cap takes effect.

“Fixed deals are starting to return to the market but we wouldn’t recommend fixing anything higher than the unit rates in your current deal or for longer than a year. If you are offered a deal, then it’s really important to check the tariff’s exit fees in case you want to leave that deal early if the price cap comes down.”

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