UK energy regulator Ofgem will raise the retail price cap for electricity and gas from 1 April 2021, returning it to pre-pandemic levels in response to rising wholesale energy demand and prices.
When wholesale prices fell sharply last year in the wake of the first lockdown, the level of the price cap fell by £84 in October to its lowest level yet for the current winter period, Ofgem said.
Demand for energy has since recovered, pushing wholesale prices back up to “more normal levels”, according to the regulator.
For six months from 1 April the price cap will increase by £96 to £1138 for 11 million default tariff customers, and by £87 to £1156 for 4 million pre-payment meter customers.
Ofgem adjusts the level of the cap up or down twice a year to reflect the costs of supplying electricity and gas for suppliers.
Ofgem chief executive Jonathan Brearley (pictured) said: “As the UK still faces challenges around COVID-19, during this exceptional time I expect suppliers to set their prices competitively, treat all customers fairly and ensure that any household in financial distress is given access to the support they need.”
Energy UK’s chief executive Emma Pinchbeck responded to the move saying: “Ofgem sets the price cap at a level to ensure that it’s both a fair price for customers and to cover the costs suppliers face so they can continue to provide reliable services to homes.
“Today’s rise reflects that the cost of buying energy – by far the biggest part of the bill – has risen significantly over the last few months.
“It also includes a greater allowance for debt given the difficulties many customers are facing in paying bills at present.
“Suppliers have been doing everything they can to support households through this difficult period – increasing the amount of payment holidays, agreeing repayment plans as well as providing emergency credit to prepayment customers.
“Any customers experiencing financial difficulties should contact their energy supplier.”