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Energy cap increase will hit those on Universal Credit

10/02/2021

The hike on the energy price cap will be a “heavy blow” to those living on Universal Credit.

That’s the latest from Citizens Advice in response to Ofgem’s latest update to the energy price cap.

The change will see the cost increase by £96 for default tariff customers and by £87 for pre-payment meter customers.

Speaking of the increase, Alistair Cromwell, Acting Chief Executive of Citizens Advice, said: “This increase will be a heavy blow to a lot of households. For many people on Universal Credit, it will come at the same time as the £20 a week increase to the benefit is set to end.

“With a tough jobs market and essential bills rising, now is not the time for the government to cut this vital lifeline”.

According to Citizens Advice, the £20 uplift would cover nearly a whole week (six days) energy costs for a below-average income household.

In December research by the charity showed that 2.1million households were behind on their energy bills, 600,000 more than in February 2020.

The research also showed a quarter of all energy customers – up to seven million households – worry they won’t be able to pay their bill this winter.

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What is the energy price cap?

The price cap protects consumers who have not switched energy supplier by ensuring they pay a fair price for their electricity and gas.

Ofgem adjusts the level of the cap up or down twice a year to reflect the costs of supplying electricity and gas for suppliers.

It’s important to note that the energy cap only applies to people who are on a standard variable tariff (SVT), which is typically the most expensive, or on a prepayment meter.

If you have never changed supplier or it’s been a while since you last changed, you’ll more than likely have defaulted to a standard tariff when your fix period ends.

The price cap won’t limit your total energy bill, however. That will depend on how much energy you use.

 

Why is the price cap changing?

Ofgem announced that from April 1, 2021, the price cap will return to pre-pandemic levels as a result of the changes in wholesale energy prices.

In the wake of the first lockdown of 2020 wholesale prices fell sharply and the level of the price cap fell by £84 in October to its lowest level yet for the current winter period.

However, as demand for energy recovers so has the wholesale prices and they are returning to a more normal level.

As a result, for six months from April 1, the price cap will increase by £96 to £1,138 for 11 million default tariff customers, and by £87 to £1,156 for four million pre-payment meter customers.

According to Ofgem, households on default tariffs are saving an estimated £75-£100 a year or £1 billion in total on their energy bills as a result.

Consumers who want to avoid the increase and save money should shop around ahead of the increase in the price cap.

Jonathan Brearley, chief executive of Ofgem, said:  “Energy bill increases are never welcome, especially as many households are struggling with the impact of the pandemic. We have carefully scrutinised these changes to ensure that customers only pay a fair price for their energy.

“The price cap offers a safety net against poor pricing practices, saving customers up to £100 a year, but if they want to avoid the increase in April they should shop around for a cheaper deal.

“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.

“The government and Ofgem have been working with the energy industry and consumer groups to support customers through this difficult time and I urge anyone worried about paying their energy bills to contact their supplier and access the help available.”

 

Switching energy supplier

There’s no loyalty when it comes to making your money go further with suppliers so it’s worthwhile shopping around to find out what’s available on the market.

Changing energy supplier can seem like a hassle but it’s important to review your tariff annually to make sure you’re getting the best deal.

Believe it or not, you could change your supplier in just a few simple steps.

 

  • Shop around: It pays to shop around so the first thing to do is start reading up on different tariff types and how they could benefit you. If you’re on a SVT you could be throwing away more than £300 per year by not switching. Check out price comparison sites such as USwitch or Quotezone to find out what deals are on offer for you. The cheapest are typically found online and are fixed deals – meaning you’ll pay a fixed amount for usually 12 months. Other advice can be found at Citizens Advice.
  • Information gathering: You’ll need to have your personal details and some information about your current tariff to hand. Make sure you have a note of your postcode, name of current supplier and name of current tariff. If you’re unsure which tariff you’re on you can find the details, along with supplier details, on a recent energy bill.
  • Weigh up your options: Don’t just go with the first deal you find. Of course, cheaper prices is important but you may want to consider customer satisfaction scores, green energy tariffs or fixed deals with no exit fees.
  • Make the switch: Once you’ve decided on a new supplier and energy tariff, the last step is to confirm the contract and how you plan to pay. In some instances, paying by direct debit can save more money. Your new supplier will then be in touch to confirm your switch-over date. The process can take up to 21 days but in most cases, it’s around 17 days. You have a 14-day cooling-off period to change your mind and cancel from the date you agree on a contract. You need to contact the supplier to cancel any contract.

 

Worried about utility bill debt?

If you’re struggling with utility bill debt and are seeking advice, talk to Creditfix. Our expert advisors are trained in helping people find a debt solution suited to their needs – including writing off a percentage of unsecured debt.

For free, confidential advice call 0808 253 5687.

 

We have a wide range of debt management solutions that could help you write off up to 81% of your debts

Check if you qualify

 

 

 

 

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