Ofgem’s revised price cap comes into effect

Ofgem’s revised price cap on standard variable and default tariffs comes into effect today (1 April).

The energy regulator, which announced the changes in February, has raised the level of the cap to £1,254 – an increase of £117.

The price cap for pre-payment meter customers increased by £106 to £1,242 a year for the same period of a six-month “summer” price cap.

The new level will be reviewed again later in the year.

Today’s rise has prompted concerns from the sector, with many urging customers to switch away from standard variable tariffs (SVTs).

Natalie Hitchins, Which? head of home products and services, said: “Many people who hoped the price cap would bring an end to unwelcome price increases will be left reeling after price hike Monday adds more than one billion pounds to their energy bills.

“If you are one of the millions of energy customers stuck on a rip-off standard variable or default tariff, our advice is simple – switch as soon as possible.

“There has been a recent rise in the number of cheap deals on the market – so you could choose better customer service while potentially saving more than £300 a year.”

Stephen Murray, energy expert at MoneySuperMarket, said: “This price rise might sound like an April fool, but unfortunately it’s no laughing matter.

“With the clocks going forward and summer on the way, you might not think now is the time to tackle your energy bill, but it really is.

“If you switch today to a competitive tariff with a big six or emerging provider, you could ignore all the noise from the regulator and see your annual bills come down by £250 or more.”

And Lily Green, head of research at auto-switching service Look After My Bills, said 17 energy companies are raising prices.

“The price cap has become an excuse for a price rise. Suppliers big and small are raising prices as high as they can,” said Green.

“No less than 17 energy companies are raising prices including all of the big six.

“A big six supplier has never raised prices by this much in one go. There’s no doubt many more suppliers will follow.

“The price cap was designed as a buffer for customers against expensive bills. Sadly, the big suppliers aim for the absolute maximum level, meaning you end up paying more than you need to.”

Announcing its financial results in February Centrica, the owner of British Gas, said it expects the default price cap to affect profits for this year.

The firm reported that it shed 742,000 UK energy supply accounts in its preliminary results.

Iain Conn, group chief executive of Centrica, said the impact of the price cap has been higher than expected a year ago.

Conn also cited the “one-off increase in the first period”, which the company is challenging.

The price cap was also blamed as being a factor in the collapse of the merger between fellow big six providers SSE and Npower last year.

“Adverse developments” in the retail market and “regulatory interventions” such as the price cap were cited as reasons behind the decision.