Energy prices have increased by 13% today following the rise in Ofgem's price cap. Consumers who do not have smart meters are being urged to submit a meter reading immediately to avoid being charged the higher rate for energy used before the increase took effect.
Price cap rise and its impact
From today, a household using a typical amount of gas and electricity will pay an additional £18 per month. The price cap affects approximately 33 million homes in Britain, though households on fixed-rate tariffs, which account for about 40% of British households, are not impacted. Ofgem has also revised its definition of 'typical' consumption downward, reflecting changing household habits and improved energy efficiency, according to the BBC.
Analysts have warned that the higher rates, worsened by the ongoing conflict in the Middle East, are likely to persist at least until winter. Chancellor Rachel Reeves has indicated that means-tested support could be introduced in the autumn, though her position is uncertain under a potential incoming cabinet led by Andy Burnham. Experts say future rates depend on the outcome of negotiations between the US and Iran regarding the Strait of Hormuz, a critical chokepoint that normally handles 20% of the world's natural gas.
Expert warnings and consumer debt
Craig Lowrey, principal consultant at Cornwall Insight, warned that even in the best-case scenario, the impact of the war would be felt for months to come. British energy suppliers were owed a total of £4.79 billion by consumers by the end of March this year. National Energy Action said the recent heatwave highlighted the need to improve energy efficiency in properties and provide debt relief for those struggling to pay. Suppliers offer schemes to help customers facing difficulties, and consumers are advised to remain vigilant against scams, including fraudsters posing as government or energy company officials.
Martin Lewis's advice on fixing tariffs
Money Saving Expert founder Martin Lewis urged consumers to take advantage of several 'cheap fixes' that also launched today. He wrote: 'Everyone on standard-rate tariffs will see their price rise tomorrow as Ofgem's 13% higher July Price Cap starts. Ironically, at the same time, there's a few new cheap fixes launching – letting you lock-in far cheaper – as wholesale costs have been a smidge lower this last week.'
Lewis cited Fuse Energy, which offers an average rate 17.2% lower than the price cap for new customers on a 13-month fixed-term tariff. The second best option is Outfox, at 16.5% less than the price cap for both existing and new customers on a 15-month fixed-term tariff. Among major suppliers, Eon was the cheapest at 15.4% less than the July price cap for both existing and new customers on a 12-month fixed-term tariff.
Standing charges criticism
Lewis highlighted that the most common complaint from consumers concerns standing charges. Speaking to the Commons Public Accounts Committee, he said the fixed daily fees were 'by far and away the thing that drives people mad the most'. He used an analogy: 'If I go to buy a book from a bookshop, they don't say 'Sorry you have to be a member of a club in order to buy a book because we have fixed costs'. Why do we have to have fixed costs factored into a daily charge and variable costs factored into a unit rate?' Lewis expressed disappointment that Ofgem had not introduced a 'dual price cap' to create a lower and standard rate depending on usage.
