How the proposed energy price cap changes could affect your bills
- Credit: PA
Under new proposals from Ofgem, energy price rises could be about to become smaller but more frequent.
The energy regulator said that it might insert two new reviews a year, one in January and another in July,
With this in mind, here is a look at what impact the changes could have on customers and what those who are worried about bills can do in the meantime.
What impact could reviewing the price cap more regularly have on customers?
The price cap on household energy bills could be reviewed every three months under new plans mooted by Ofgem on Monday (May 16).
Ofgem, which is consulting on the issue, said a more frequent price cap would reflect the most up-to-date and accurate energy prices – meaning when prices eventually fall from current record highs, customers would see the benefit sooner.
Myron Jobson, senior personal finance analyst, interactive investor, said smaller but more frequent price changes may be more easier to deal with than less frequent but sharp price hikes.
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The energy price cap is currently at a record £1,971 per year for the average household and it is expected to jump sharply again in October.
Mr Jobson said: “The recent increase in the energy price cap, which has added almost £700 a year to the average household’s bills, has pushed many finely crafted budgets to breaking point.”
He added that it is easier for people to budget for smaller price rises than larger ones.
“A more regular review of the energy price cap would mean that prices would come down as quickly as they go up," he said.
“However, high inflation means the latter will be a reality for some time.”
Over the past year, gas prices have risen so rapidly that suppliers were often forced to sell the gas for less than they bought it for due to the price cap.
By changing the price cap more often, Ofgem will make it more reflective of international gas prices, taking some of the pressure off suppliers.
How quickly could the proposed changes come in?
The consultation is open until June 14, 2022.
Ofgem would be looking to implement the reforms from October, meaning the first change under the new system would be made in January 2023.
What about customers who are worried about being able to afford their bills?
Ofgem has information for people who are struggling with their bills on its website.
It suggests contacting suppliers as soon as possible if people are worried about paying energy bills or are in debt to suppliers.
Suppliers must work with consumers to agree on a payment plan customers can afford under Ofgem rules.
People can also ask for more time to pay, access to hardship funds and payment breaks or reductions, under the potential options.
Mr Jobson said it was important to regularly review spending habits to ensure that people are living within their means to avoid future money issues.
He said: “Those struggling to keep on top of their energy bills needn’t suffer in silence – there is support out there. Energy companies have schemes to help people who are struggling to afford their bills.”
Some energy companies offer certain schemes, for example, if someone is making their home more energy-efficient or offering free boiler checks and upgrades.
Some people may also qualify for particular forms of help such as Winter Fuel Payments or the Warm Home Discount Scheme. There are also some charities which may be able to offer grants.
What if I believe my provider has raised my direct debit to an unreasonable level?
Many people have told MoneySavingExpert.com that they have seen their direct debits increase by significantly over the average price cap increase – with some seeing them double.
People can contact their provider to search for an explanation and see what could be done.
MoneySavingExpert has a guide on direct debits, and potentially challenging them, which can be viewed here.