Households are being advised to secure cost-effective energy contracts in anticipation of an upcoming price increase. The regulatory body Ofgem is preparing to disclose the new price cap effective from July 1 on May 27. The assessment period, which evaluates various factors including suppliers’ wholesale costs, will conclude next Monday. This timeframe incorporates a significant period during which costs surged due to the US-Israel conflict with Iran that began in late February.
Industry analysts at Cornwall Insight are predicting that the price cap, affecting approximately 33 million customers on standard variable tariffs, will rise from an average of £1,641 annually to around £1,843 starting July 1. An updated forecast is expected on Friday.
This surge coincides with many households experiencing financial repercussions from the Middle East conflict, including heightened inflation, increased fuel prices, and the looming threat of elevated food expenses.
Despite these challenges, households are being encouraged to consider switching to fixed energy deals, with an estimated 21 million customers already benefiting from such arrangements. These fixed deals lock in the unit rate for a specified duration, offering stability amidst market fluctuations.
Recent research by Moneysupermarket reveals fixed deals as low as £1,585, potentially saving households £258 annually compared to the projected price cap increase in July. Notable options include fixed deals from suppliers like Outfox Energy, Fuse Energy, E.on Next, Ecotricity, Sainsbury’s Energy, and SO Energy.
According to Laura Hinton from Moneysupermarket Energy, the return of competitive fixed deals in the market is a positive shift following the volatility in wholesale gas prices earlier this year. With expectations of energy bill hikes in July and beyond, consumers are advised to explore fixed deals now to secure savings and shield against future price increases.
Ofgem’s price cap regulates the charges that suppliers can levy on standard tariff customers for each unit of energy and the standing charge. However, it does not cap the total bill amount, which varies based on consumption and payment methods.
Simon Francis, coordinator of the End Fuel Poverty Coalition, emphasized the need for government support for vulnerable households and those in energy debt, alongside urgent reforms to reduce electricity costs for all consumers. He called for expanded access to clean energy sources, such as solar panels, heat pumps, insulation, and electric vehicles, to alleviate financial burdens, especially for low-income households.