The price cap increases SIX WEEKS after its implementation
Defunct initiative to be scrapped by 2023
Jane Lucy, Founder of Labrador explains why it serves no purpose for the future of UK energy
Promised saving of £75 up in flames
The savings that keep decreasing
The energy price cap, an initiative that promised 11 million households on an STV tariff an average saving of £75 a year, is set to increase on 1st April by 11%. In the depths of winter, Ofgem, the energy industry regulator, is about to approve a hike in energy prices that could send bills soaring by an average of £118. This will allow prices to be raised even higher than they were before it came into effect, negating the initial savings after only six weeks of its implementation. Consequently, the average bill for homes on STV tariffs is expected to rise from £1,137 to around £1,254. The hike will raise prices far ahead of analysts’ expectations of £80 to £100. This wipes out the £76 in annual savings households were promised when the price cap came into effect just over a month ago. This will result in around 15 million households with higher energy bills.
OFGEM have insisted those affected will still pay a “fair price” for their energy as the increase reflects a genuine increase in underlying wholesale costs, rather than provider profiteering.
This cap was introduced to prevent suppliers from overcharging customers by placing an upper limit on how much they could charge, based on typical use. However, the declining number of tariffs available for under £1,000 has shrunk from 89 to 4 and the price of cheapest tariffs has risen by 21% – isn’t it time to admit that the cap is not the answer?
Why was it introduced and when will it be scrapped?
The cap was introduced on 1st January 2019 and is due to end by 2023, with updates to the cap every six months. Ofgem said that by 2023, it expected other reforms and advances, such as faster switching times and smart meters, to bring about easier and fairer access to better deals. They said that “It will be up to the government to consider if the market is working well enough for the cap to be removed.”
Jane Lucy, CSO and Founder of smart-switching service Labrador has commented on the OFGEM announcement: ‘When the price cap was first implemented, it was designed to save households £75 on their bills, however, the questioned increase of the cap by £117 means that any prior savings are not only cancelled out but will actually make energy bills more expensive. Price caps will never be the way to solve the UK’s energy market as they undeniably reduce competition, promote lethargy and consequently, make consumers mistakenly believe that they are getting the best deal when this is not the case. Ultimately, consumers cannot rely on the price cap to stop overcharging within the energy industry. I cannot stress enough the importance of auto-switching and making the decision to not to sit on expensive standard variable tariffs. Smart switching technology has enabled auto-switching to become effortless, timeless and priceless. There has never been an easier way to save £417.’
The Labrador is a free, accurate and automated service that tracks your energy use, through your smart meter, and automatically switches you to the cheapest tariff on the market.