Ofgem hikes energy price cap due to cost increases
Just over a month after the energy price cap was introduced, it will be hiked on 1 April due to increasing wholesale costs, the energy watchdog said.
The price cap for standard and default variable gas and electricity tariffs will be hiked by £117 to £1,254 a year, Ofgem said, with the cap for pre-payment meter customers will increase by £106 to £1,242 per year.
Capped prices, which were first introduced by Ofgem on 1 January, are only designed increase when the underlying cost of energy increases, the regulator said, with the theory being that consumer bills will also be cut when costs fall.
Around £74 of the £117 increase in the default tariff cap is due to higher wholesale energy costs, Ofgem said, with oil prices rising last year and higher demand for gas leading to a rise in wholesale gas prices. Because of the importance of gas as a source of electricity generation, this also led to higher wholesale electricity prices.
Ofgem said its analysis suggests that default tariff customers could be paying around £75 to £100 a year more on average for their energy had the default tariff cap not been introduced even after the announced increase.