Ofgem is raising the energy price cap by 12 percent, which is expected to hit half the population. The increase is driven by a surge in wholesale fuel costs and from October, default tariff customers (paying by direct debit) will see an increase from £1,138 to £1,277, while prepayment meter customers will see a rise of £153 from £1,156 to £1,309.
The charity’s research highlighted how the changes will combine to hit families, with soaring numbers of people already behind on their energy bills and millions more reliant on Universal Credit to stay afloat, as the following details:
- The charity estimated nearly two million households are already behind on their energy bills, even before the new price rise and planned Universal Credit cut – an increase of around 410,000 from prior to the pandemic.
- More than one in four (28 percent) households in which someone receives Universal Credit are behind on their energy bill – seven times the rate among households who don’t receive Universal Credit (four percent)
- Nearly a quarter of people (22 percent), equivalent to nearly six million households, already say they are worried about paying their energy bills
- The combined effect of the £20 Universal Credit cut and the rise in energy bills would leave three quarters of Citizens Advice benefit and debt clients unable to cover their living costs
James Plunkett, an Executive Director at Citizens Advice, commented: “This price hike could lead to a perfect storm for families this autumn, hitting people at the same time as a Universal Credit cut and the end of furlough.
“It’s particularly worrying given families on Universal Credit are far more likely to already be in energy debt.
“With bills rising and incomes falling, many families will find it hard to escape. For many, debt will be the inevitable consequence.
“It all adds to the growing case to rethink the government’s planned cut to Universal Credit and keep this lifeline which has been vital to keeping so many afloat.”
Similar sentiment was shared by Peter Smith, a Director of Policy and Advocacy for National Energy Action (NEA), who called for urgent action from the Government.
“This is a devastating increase [to the cap]. Millions of household budgets are already stretched to the limit and this massive increase could not be coming at a worse time,” he said.
“As well as a significant rise in general inflation – driving up spending on other essentials such as food – the new cap level takes effect in October when millions of people will see a reduction in their incomes, as furlough winds down and the uplifts to Universal Credit are likely to be withdrawn. This toxic combination of higher prices, reduced incomes and leaky, inefficient housing, will lead to a further surge in utility debt and badly damage physical and mental health this winter.
“There is far more Ofgem and the UK Government can do to help to protect the most vulnerable consumers this winter. For years Ofgem and [the UK] Government have insisted the way to avoid increases to bills is to switch. Many fixed deals have however come to an end and for some customers switching is impossible due to levels of debt or because pre-pay customers have far fewer options to switch supplier or tariff.
“There may be limited scope to mute the impact of soaring wholesale prices within the cap, but Ofgem can and must provide deeper protection for the most vulnerable customers. The UK Government can also directly help reduce energy arrears as well as maintaining investment to reduce needless energy waste in our homes.”
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