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Energy price rise warning: Cap to go up by more than £100

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Energy price rise warning: Cap to go up by more than £100

Britons should brace for a hard winter as energy prices look set to surge after a hike in wholesale gas prices, experts say. Energy analysts warn that regulator Ofgem may be forced to increase the energy cap by more than £100, pushing up bills for millions, many of whom are already struggling financially after the pandemic. The energy cap was designed to keep a lid on prices but this would mark the second big increase this year. 

In April, Ofgem lifted the price cap by £96 to £1,138 for 11 million default tariff customers, taking it back to pre-pandemic levels. Four million households on pre-payment meters saw the cap jump £87 to £1,156.

The next change is expected to be announced on August 7 and will come into force on October 1.

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Dr Craig Lowrey, senior consultant at energy analysts Cornwall Insight, said rising wholesale energy and commodity prices are set to increase the cap by at least another £100.

He said: “That will push up this winter’s default tariff price cap to around £1,250 per year for a typical dual fuel direct debit customer.”

Wholesale energy prices collapsed during last year’s global lockdowns, but demand has now rebounded as the economy reopens.

Producers face higher costs as they invest in clean energy, while the cold winter across Europe and low levels of gas in storage facilities has also driven up gas prices.

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Older people are likely to be hit hardest because they are less likely to switch energy supplier, with four in 10 aged 55 and over refusing to switch because they like their provider, according to a study by green energy supplier Pure Planet. 

Simon Francis, co-ordinator of the End Fuel Poverty Coalition, said more than four million people are already behind on their household bills.

He said: “The increase will be disastrous. The choice between heating or eating will become even starker.”

He said living in cold damp homes has health risks, and called on the Government to provide emergency financial support.

Higher energy costs will also hit small businesses as they battle to recover from repeated lockdowns, said Martin McTague, national vice chair of the Federation of Small Businesses.

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And Will Owen of comparison site Uswitch.com, said a higher price cap in October will be bad timing – arriving as demand rises: “With many still working from home, usage remains high. The rising price cap may trap households on default tariffs into a vicious cycle of debt.”

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Energy price rise warning: Cap to go up by more than £100
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