Today (7 February 2019), Ofgem, the gas and electricity regulator, announced the level of the Energy Price Cap for the 6-month period commencing 1 April 2019.
And while an increase in the the Energy Price cap was widely flagged, the level of the increase is still a bit of a shocker.
The default price cap will increase by £117 (10.3%) to £1,254 from 1 April. It will affect approximately 11 million households.
The prepayment price cap will increase by £106 (9.3%) to £1,242 from 1 April. It will affect approximately 4 million households.
The new level of the cap will run for 6 months from 1 April 2019 through to 30 September 2019, when it will be reset again.
£74 (63%) of the increase has been attributed to higher wholesale energy costs.
The balance £43 (37%) has been attributed to network and policy costs (environmental and social schemes).
The initial level of the price cap, which came into effect on 1 January 2019, cut energy bills by £76 a year on average. This increase is 1.5 times greater than the initial cut and, from a consumer standpoint, most definitely in the wrong direction.
What that basically means is that the energy bills of customers on default energy tariffs (Standard Variable rate tariffs) are now higher £40 higher than they were before the price cap came into effect.
15 million households are going to get an energy price hike of over £1.5 billion pounds all at the same time. That has got to be some kind of record.
Energy suppliers have to provide at least 30 days advance notice of adverse price changes. That is going to be a lot of nasty letters in the post later this month.
This will not help the April inflation numbers at all.
Joe Malinowski, founder of the award-winning energy price comparison website TheEnergyShop.com commented.
"Anyone who thought that a cap was, well a cap, is in for a nasty shock. Not only have your energy bills gone up under the cap, but they are going to be £40 higher than before the cap came into effect. If that's confusing, we sympathise."
Joe Malinowski, concluded.
"The energy price cap might have been a nice idea and worked for some, for a few weeks anyway. However, the reality is that government intervention can't hold back the tide of volatile or rising energy bills. Far better to lock into a fix term energy deal that offers a guaranteed saving of £300 than gamble on where your bills might end up in a few months time. If you haven't switched already, do it now."