The rising cost of energy has led many providers to hike up their bills as much as they can – and the sky’s the limit with fixed-term deals, which do not have to comply with rules on pricing
Energy providers are charging up to £650 more than the price cap as they grapple with soaring costs.
Some energy firms are charging up to £1,923 for a year of gas and electricity – £646 more than the £1,277 price cap coming in on October 1 and £785 more than the £1,138 cap now.
This cap limits the amount firms can charge the average customer on their default gas and electricity tariffs – usually variable-rate deals. But it does not apply to fixed-rate deals, which are normally the more expensive option.
Energy companies are struggling with the rising price of gas, which has already driven some to the wall.
According to MoneySupermarket, the cheapest variable deal for a two-bedroom flat is £1,140 a year, from The Utility Warehouse. The cheapest fixed rate is £1,313, from British Gas.
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But the most expensive deal is £1,923, from Outfox The Market – though the supplier does also have a slightly cheaper option at £1,817.
In total 35 out of 51 energy deals charged more than the price cap.
Energy prices are going up for a toxic cocktail of reasons.
Surging demand post Covid, low wind speeds in Europe and power station closures, as well as a fire in Kent which cut off power supplies from France has created a “perfect storm” for the industry.
Experts have warned that just 10 of the suppliers that existed in January could remain by Christmas as the cost in wholesale gas prices soared by 250%.
The energy price cap will not be lifted, Ofgem and the business secretary Kwasi Kwarteng confirmed this week , despite calls for it to be suspended to allow struggling firms to pass on higher gas prices to customers .
However, energy prices are still likely to rise next year with a higher cap on how much firms can charge customers – a likely rise of around £300.
Pressure on gas and energy supplies across the world this year has been caused partly by cold weather in Europe which left gas stocks lower than usual, along with increased demand from Asia which also suffered from colder weather.
How the gas shortage affects you
But the government and Ofgem said the UK did not have supply issues and instead had a diverse range of gas sources “that can more than meet demand”.
Kwarteng has also pledged that consumers will not see power cuts as a result of the crisis.
Ultimately, power cuts are unlikely as the system is geared up to import energy from abroad, even if we have to pay through the nose for it.
What is at risk is temporary power cuts – either imposed or voluntary – for big energy users such as steelmakers and chemical plants.
If your energy provider does stop trading, the good news is that you will not be out of pocket – though you might be severely inconvenienced.
This is because of the energy regulator, Ofgem, which steps in to protect consumers.