Millions of Brits are set to see their gas and electricity bills leap by £139 per year as regulator Ofgem raises the energy price cap.
The move comes as households continue to battle with the lasting financial impact of the COVID-19 pandemic, and is largely the result of rising wholesale energy costs, with gas prices increasing by 55% since January 2021 alone.
In this article, we explain when and why your energy bills are likely to rise, and where to find the best deals on the market if you decide to switch your supplier before the changes come into effect.
When will your energy bills go up?
Ofgem’s price hike - due to come into effect on 1 October - will affect more than 11 million families on "default" variable energy tariffs who have not switched their supplier in the past year, while an estimated 4 million households with pre-payment meters will see an even greater increase.
As of June 2021, the average variable tariff for a dual fuel customer is £1,131 per year, which equates to nearly 4% of the average UK household budget (according to figures from Ofgem). In October, the average annual dual energy tariff will increase from £1,131 to £1,270 - a hike of over 12%. Customers on prepayment schemes could see their annual bills rise even further by as much as £153, marking a 13.5% leap year-on-year.
The price increase will disproportionately affect the most vulnerable low-income households, who are more likely to be on variable rate “default” tariffs or pre-payment meters. If you’re looking to switch suppliers before the changes come into effect, we’ve listed the cheapest fixed and variable deals on the market below, based on dual fuel tariffs for an average UK household for a year.
The cheapest fixed-rate energy deals
|Supplier||Tariff||Price per month (£)*||Price per annum (£)*||Period|
|Avro Energy||Simple and Flow12M||£86.29||£1,035.53||12 months|
|Utility Point||Just Join Up 21 12M Fixed Wk31||£86.31||£1,035.72||12 months|
*Cheapest deals based on dual fuel fixed-rate tariffs for an Ofgem-defined ‘medium user’, paying by monthly direct debit. Note, these may not be available in every region of the UK. Prices correct as of 09/08/21. Source: Comparison Technologies.
The cheapest variable-rate energy deals
|Supplier||Tariff||Price per month (£)*||Price per annum (£)*|
|Outfox the Market||One Green Flex 8.0||£86.25||£1,035.00|
|PFP Energy||Simple Clear Paperless||£90.48||£1,085.76|
*Cheapest deals based on dual fuel variable rate tariffs for an Ofgem-defined ‘medium user’, paying by monthly direct debit. Note, these may not be available in every region of the UK. Prices correct as of 09/08/21. Source: Comparison Technologies.
Fixed vs Variable energy tariffs
A "fixed” energy tariff means that the unit price for gas and electricity will not change for the duration of the plan. A “variable” rate means your energy price can vary during the plan at your provider’s discretion.
Fixed-rate tariffs offer you the stability of knowing your monthly bill will remain the same, and are often some of the cheapest deals on the market. However, you will usually be tied to the contract for at least a year, and you will need to pay additional fees if you want to exit a fixed rate tariff before your period is up. On the plus side, if you have a fixed price plan and your supplier announces a price rise, your rates will not change while you are on your existing contract, so you will not be affected by Ofgem’s upcoming price hike. If you make it to the last 49 days of your term, you can usually switch without incurring any fees.
Variable-rate tariffs are usually more flexible and you can typically exit your contract at any time with only a relatively small charge. If you are on a variable tariff, you could see your monthly energy bill increase drastically as a result of any wholesale energy price changes, so you may be eager to switch your supplier before the Ofgem price cap goes up and take advantage of the minimal exit fees. Bear in mind, however, that variable tariffs typically do not have a specified end date, so if you want to avoid the price rise, you'll have to be proactive and initiate the exit process yourself. You can exit a variable rate energy tariff by contacting your provider directly and following their cancellation protocol.
When should you switch your energy supplier?
If you're on a fixed-rate tariff, your supplier has to let you know when there are just 49 days of your contract remaining, and you can usually switch to another deal during this period without paying an exit fee. If you're on a variable rate tariff, you can switch your energy supplier at any time, although you will likely incur an exit fee for doing so. However, most exit charges sit in the range of £30 - £60, so switching your supplier will probably work out less expensive than sticking with an existing variable tariff, which will likely increase by around £140 annually from October.
How to switch your energy supplier
You can shop around to find a cheaper alternative using a comparison tool such as Switchd* (including 3 months free when you sign up), or head to our list of the best auto-switching services, and consider opting for a fixed rate deal instead of a variable one to shield yourself from any cost increases over the term of your contract. If you switch suppliers before the new price cap comes into effect on 1 October you could secure yourself a much cheaper tariff, which will remain consistent throughout the term.
Consider going green
Now could also be a good opportunity for the climate-conscious to switch to a greener - or entirely green - energy deal. Head to our list of the best green energy suppliers in the UK for some of the best offers on the market.
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