Although the new price cap has only just taken effect, customers are already being warned that energy bills will likely increase again next year.
Experts now predict that the energy price cap, which sets a maximum amount that a supplier can charge for a unit of gas or electricity, is likely to increase by almost a third when it is reviewed again next April.
It’s estimated the price cap will increase by £400 and this will mean the cost of gas and electricity for the average home will be £1,660 per year.
Why will the cap increase again?
Natural gas prices are currently at record highs. Due to the fact that the amount energy suppliers can charge customers for their gas and electricity is capped, suppliers are currently selling energy to customers for less than it’s costing them to buy it. As a direct result of this, many energy companies have gone out of business.
Even if wholesale gas prices drop significantly from today (which is highly unlikely), the extra costs that suppliers have had to shoulder in the last couple of months means a steep rise in household bills in April is inevitable. Thanks to this, some experts believe that the price cap could even reach £2,000.
Price cap review could force bills even higher
Many more energy companies are expected to go out of business before the price cap is reviewed again. As a result, Ofgem is hinting that it may review the way the price cap works. In addition, the regulator’s chief executive, Jonathan Brearley, has said that the company will increase scrutiny of the business models of energy suppliers.
Speaking at a recent conference, he said that the surge in gas prices had made clear that Ofgem needed to “go further” with its regulation of the market. He added that “Although the gas price rise is unprecedented today, we will need to plan on the basis that shocks like this could happen again”.
As part of this, it’s predicted that the company may allow suppliers to charge more for gas and electricity when wholesale prices increase. He’s previously stated that although the cap stops firms from making an unfair profit “legitimate costs have to be passed through”.
If the formula that governs the price cap changes and suppliers are allowed to pass these ‘legitimate costs’ onto customers, then bills may rise once more in October 2022.
How to protect yourself from rising energy costs
At present, comparison services are not saving people money on their energy bills and many providers have stopped offering the service because of this.
However, even though it’s currently cheaper to remain on a default tariff that’s protected by the price cap rather than move to a new fixed-term deal, this situation may change if the price cap rises again in April 2022, as many experts predict it will.
As a result, you should keep an eye on the deals that energy comparison services can offer you when they’re operational again. They’ll show you all the best energy deals available from the UK’s best energy suppliers. Even if these deals can’t save you money when compared with the current price cap, they may be far cheaper than the April 2022 price cap, so you may be able to lock in a great deal before prices rise again.
