The increase is down to a 60% surge in wholesale gas and electricity prices, experts have warned – and it’s set to hit households over the winter months
Households will face another energy price rise of £280 next year following a 60% surge in wholesale gas and electricity prices, experts have warned.
The cost of gas – which fuels many UK power stations – is rising sharply due to higher demand, a move that is likely to hit the next energy price cap.
Wholesale energy prices have surged to 11 times normal levels – a record high – in the past fortnight, following a surge in gas demand, low wind speeds and power station closures.
The UK was even forced to fire up two old coal power plants to help guarantee electricity supplies this week.
The leap in costs in recent months has already led to regulator Ofgem increasing its price cap for standard tariff and other default deals by £139 a year from October 1.
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The typical gas and electricity customer is likely to see their bill go up by £139 to £1,277 a year from next month.
The price cap limits the amount that companies can charge customers on standard variable tariffs.
But there are fears of another jump when Ofgem reviews the ceiling rate in April.
Analysis suggests that the latest figure will rise again by as much as £280 when the cap is next reviewed.
Joe Malinowski, of TheEnergy- Shop.com, said wholesale gas prices have risen 68 per cent in the past five weeks, while costs are up an estimated 324 per cent on this time last year.
“He said data from Germany shows wholesale electricity prices have risen 66 per cent, and are up 174 per cent year on year.
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Mr Malinowski added: ‘The simple maths implies that, as things stand, the next level of the cap will increase by around £275-£280. This would take the energy price cap, when it is next reviewed, and increased, on April 1, 2022, to around the £1,555 mark.
“To put that into context, price-protected standard tariffs would be 50 per cent higher than they were two years prior.”
Soaring prices have also led some suppliers to pull their tariffs from comparison websites.
On Thursday, just three small energy companies were offering deals on Uswitch and GoCompare, with Comparethemarket pausing its service altogether.
A spokesman said: ‘We’ll resume energy comparison as soon as we can be confident we can offer true comparison for customers.’
Jane Lucy, of switching site Labrador, said: “These suppliers may not return to the market for months. We will now be instructing customers not to switch.”
Meanwhile, the surge in wholesale costs has already caused the collapse of some small energy suppliers.
People’s Energy and Utility Point, which had more than 500,000 customers between them – stopped trading on Tuesday. In total, five suppliers have failed since August 1.
Ditching a standard tariff will save you money
When any fixed term energy deal ends you will automatically revert to your energy supplier’s standard tariff, which is the most expensive kind on the market and the price plans hit by the energy price cap.
If you haven’t switched in a while, it’s likely you’re paying the standard rate and that you could make a substantial saving by ditching your supplier.
While it’s an option to speak to your existing provider about a cheaper deal, there might be an even bigger saving elsewhere. Make sure you compare tariffs to access the very best deal available.
It’s time well spent as a typical household saves around £280 by switching, according to regulator, Ofgem.
See our guide on how to switch and save on your energy bill, here.