Price Cap: Ofgem warns suppliers will begin increasing direct debits before October

Ofgem, the UK energy regulator has confirmed this morning the price cap will increase to £3,549.

The increase of over 80% will see typical households pay £300 a month on average for dual fuel.

The rise officially comes into force on October 1, however, Ofgem said: “It is possible some suppliers may begin increasing direct debits before this date to spread costs.”

The new cap level isn’t the maximum anyone will pay, the price cap sets a limit on the rates you pay for each unit of gas and electricity, so if you use more, you’ll pay more, use less, you’ll pay less.

Ofgem has also warned there is worse to come, the regulator said it “is not giving price cap projections for January because the market remains too volatile, the market for gas in Winter means that prices could get significantly worse through 2023.”

Energy market analysts Cornwall Insight consistently predicted the October price cap would rise to more than £3,500.

With the energy price cap now being updated quarterly, rather than every six months, Cornwall Insight has predicted what the next four price cap changes will be.

Analysts predict the price cap will reach £5,386.71 in January next year before soaring to £6,616.37 in April to June.

Dr Craig Lowrey, Senior Consultant at Cornwall Insight said: “The rise in the Default Tariff Cap (price cap) was unfortunately inevitable, as UK bills continue to be the victim of an unstable and unpredictable global market.”

“While there is still some time until the January and April caps are set, the energy crisis is showing no sign of abating.”

“Customers worried about when their direct debit will increase should contact their supplier.”

“Any money taken from customers to build up a credit will only ever be spent on their energy supply and customers can ask for their credit balance to be returned at any time. ”

“Anyone worried about paying their bill should contact their supplier in the first instance.”

Check how much you’ll pay for energy from October.

Our new calculator shows an estimate of how much bills will be under the October price cap unit rateshttps://t.co/X1HrxQyHxG

— Money Saving Expert (@MoneySavingExp) August 26, 2022

Dr Lowrey said: “A key focus for the next Prime Minister and for Ofgem must be protecting consumers, and the wider economy from the impact of this rise.”

“There are several avenues that can be explored including a review and expansion of the current support package of at least £400 per household.”

“However, all of these are temporary solutions and must be accompanied by a focus on implementing a viable long-term solution.”

“Today should be seen as a wake-up call to policy makers that short-term thinking and triage of the energy system is not enough.”

He added: “Without real change to the energy system in this country it is consumers, suppliers and the economy that will all continue to suffer the consequences.”

Welsh Government

The Welsh government has slammed its UK counterparts saying the Conservative government has failed to act as “energy price cap increases and profits of oil and gas giants soar.”

Minister for Social Justice Jane Hutt hit out at the UK government saying they are failing to support the most vulnerable with the cost-of-living crisis.

The minister said: “We’re in the midst of a crisis. Hundreds and thousands of families right across Wales and the wider UK are facing the biggest fall in living standards since records began.”

“The projections for those who will be plunged into poverty are unforgiving and all the while we are faced with the unacceptable three-pronged chaos of a failing UK government, a cruel price cap increase and the record profits of oil and gas giants.”

As the energy price cap raises again, we need an emergency budget now, to freeze energy prices, and to tax oil and gas giants.

We’re doing all we can to support people in Wales, but UK Govt’s failure to address this crisis will result in further hardship for many families.

— Mark Drakeford (@PrifWeinidog) August 26, 2022

Jame Hutt: “While oil and gas giants bathe in record profits from shaking down customers and revelling in government support packages, the UK Government fails to even acknowledge an emergency budget is necessary.”

“People across Wales need support now. We need an emergency budget, we need to freeze gas and electricity prices immediately and we need to tax the oil and gas giants making record profits.”

Hammer blow to family budgets

The TUC has today warned that the rise in the energy price cap will be a “hammer blow to family budgets” that will push millions into fuel poverty.

New snap analysis from the union body shows that energy bills are now on course to rise 35 faster than wages and 57 times faster than benefits over the final quarter of this year.

The analysis also shows how record-high energy prices are wiping out the value of pay rises.

Between October 2021 and October 2022, average nominal wages are set to increase by £1,470 per year. But over the same period energy bills are set to increase by £2,270 per year – leaving workers with a net loss of £800.

TUC General Secretary Frances O’Grady said: “Nobody should have to worry about heating their homes this winter.”

“But millions are facing bankrupting bills in the months ahead.”

“Today’s energy price rise will be hammer blow to family budgets and tip many households into fuel poverty.

“Ministers must immediately cancel this catastrophic increase. This is the worst possible time for the government to go missing in action.

“And to make sure energy remains affordable to everyone, they should bring the energy retail companies into public ownership.”

On the need to get wages rising, Frances added:

“This living standards emergency hasn’t come out of the blue. It’s been caused by years of wages not keeping pace with inflation.

“If we don’t pay packets rising across the economy, working people will just keep lurching from crisis to crisis.”

The TUC says that the government should set out a programme to make UK living standards more resilient and the UK economy more resistant to a future crisis.

“This should include cancelling the October energy price hike for families and providing financial support for essential public services being crippled by rising bills, such as schools and hospitals.”

Huge shock for pensioners 

Caroline Abrahams, Charity Director at Age UK, said:“Although the ballpark figure for the new price cap had been trailed in advance there will be many older people for whom today’s announcement is completely new and a huge shock.”

“Millions of pensioners will now be coming to terms with the reality of what it means for them: the prospect of trying somehow to get through the autumn and winter with prices soaring and yet with very little flex in their fixed incomes.”

“It’s a truly frightening prospect and one that most could not have prepared for, and never expected to face at this point in their lives. I think a lot of older people will be utterly bewildered that it has come to this and will also feel badly let down, and I can’t say I blame them.”

“The new Prime Minister must make their first act providing additional support for the millions of households in our country whom rising inflation is set to overwhelm, among them many pensioners.”

“We are fast approaching a national emergency which will leave a significant proportion of the population unable to afford even a basic standard of living. Every day older people are telling us how scared they are; they need urgent reassurance from the Government that they will not abandon them.”

“It’s later than the Government thinks: we understand that there is essentially a transition underway between one Prime Minister and the next, but every day the economic forecasts seem to worsen and yet there is no clear word from the centre about how they will respond. Unfortunately, this is increasing the sense of insecurity many older people feel.”

“That’s why the new Government must act quickly to give older people hope and confidence. In the meantime, it would be extremely helpful if both candidates made it clear that they will stand by those with most to fear from soaring inflation, among them many pensioners, over the difficult months to come.”

Age UK is urging older people to call its free national advice line on 0800 169 65 65 before turning the heating down or off, to check they are receiving all the financial support available to them, including key benefits such as Pension Credit and Attendance Allowance.

In addition, energy suppliers have a duty to offer support if people are struggling with bills or debt, so the Charity is urging people to contact their supplier directly to ask about available support including an affordable repayment plan.