The energy price cap will rise by £693 to £1,971 tomorrow, piling more pressure on to already struggling households.
Traditionally, the solution to rising gas and electricity tariffs was for customers to shop around for a better deal. However, doing so could now leave households hundreds of pounds out of pocket. Telegraph Money takes you through the state of the energy market and helps you decide whether you should consider fixing.
Should I lock my energy costs in with a fixed tariff?
The average fixed deal costs £3,173 a year, according to Uswitch, the price comparison service. This is £1,202, or around £100 a month, more than the price cap for variable tariffs. The cheapest deal, a two-year fix from Ovo Energy, costs £2,650. Some energy firms are offering fixed deals costing up to £4,200.
The price cap is supposed to be updated every six months, meaning it is for all intents and purposes a six-month deal that consumers can leave at any time, without paying fees.
Analysts at Cornwall Insight have predicted that the price cap will rise again to around £2,900 in October, a 47pc increase on April’s cap. Even if this is the case, the average home on a standard variable deal will pay around £2,436 over the next 12 months, some £737 less than on the average fixed tariff.
Does my energy supplier offer a price cap protected tariff?
All suppliers that offer a default tariff have to cap it in line with the rules of Ofgem, the regulator, apart from a few select “green” suppliers. However, they are not required to actively market these deals, which can sometimes make them difficult to find.
In some cases, providers have removed default tariffs from their websites. This means customers may be unaware it would cost them less simply to roll on to their supplier’s default tariff rather than to switch deals. Some suppliers have even taken to “pressure calling” customers with “time-sensitive” fixed deals.
Your supplier has to tell you whether it offers a default tariff if you ask it directly.
Some renewable suppliers, including Good Energy and Ecotricity, have an exemption from the energy price cap. Good Energy’s standard variable deal costs the average household £2,230 a year. This is 8pc, or £259, more than the April cap. Ecotricity’s default deal would cost the average household £2,179 a year – £208 more than the cap.
What happens if my energy supplier collapses?
If your supplier goes out of business, Ofgem will switch you to a “supplier of last resort” and any credit with the older energy provider will be transferred across. Affected households should take meter readings as they will need to pass these on to their new supplier.
Gillian Cooper of Citizens Advice said: “If you’re a customer of a failed supplier, Ofgem will move you on to a different one. This can take a few weeks, but your gas and electricity supply will continue in the meantime. Your new supplier will contact you and it’s good to be prepared beforehand. Take a note of meter readings, keep old energy bills and make a note of your account balance.
“Wait until your new supplier is appointed before cancelling any direct debits. This should all make the transition easier.”
What has the Government done to help?
The Chancellor, Rishi Sunak, has announced billions of pounds in state support to ease the cost of spiralling energy bills on families.
A £200 government subsidy will be given to 28 million households to lessen the impact of the price cap rise. An upfront discount of £200 will be offered from October, with the Government meeting the costs. The discount will be automatically recovered from bills in equal £40 instalments over the next five years.
This repayment will begin in 2023. Households in England in council tax bands A to D will also receive a further £150 rebate. These payments will be made by local authorities from April and will not need to be repaid.
The Government said this one-off payment would benefit around 80pc of all homes in England and is £1bn more generous and more targeted towards lower-income families than a VAT cut on energy bills.
