The government’s energy price limit will cause prices to fluctuate more than ever, experts are warning as Ofgem looks set to raise the cap just months after it was first introduced.
The “significant” rise is expected to reach around £80 to £100 a year industry insiders say, higher than the touted £76 per annum savings the former price cap promised.
“It will be wiping out the savings or leaving customer with larger bills than from before,” Richard Neudegg, Head of Regulation at Uswitch, told City A.M.
The April rise comes just three months after the £1,137 price cap was introduced for standard variable tariffs, meaning customers will only have saved £19 from the policy.
“It’s quite a thing to say to consumers that they will save £76 per year for a price cap that lasts for three months,” Neudegg said.
The cap, which will be reviewed every six months, mean consumers see more regular price increases than ever before, he said.
Most suppliers, who would previously change their tariffs individually, are now likely to all increase prices at the same time as the cap is reviewed every six months.
His comments came as it was revealed that less than one in five Brits think the price cap will save them money.
Almost a third of those surveyed believe they will be worse off after the cap is reviewed next month, with two thirds thinking their bills will not change, according to Money Super Market.
Meanwhile, only five per cent of respondents said they thought the new level will benefit their wallets.
“Relying on the regulation could actually end up costing you more money, so the message is clear – take control of your bills. If you go online and switch to a competitive tariff today, either with a big six or emerging supplier, you could see your annual bills come down by £200,” said Stephen Murray, energy expert at Money Super Market.
A spokesperson for the regulator said: “Ofgem updates the level of the cap every six months based on latest estimated energy costs. It is likely when we update the level next month that we will announce a significant rise in the cap because of higher wholesale energy costs.
“However consumers are still better off under the cap because it ensures that they always pay a fair price for their energy. If wholesale energy costs fall in the future for example, suppliers would have to pass on the savings to consumers.”