April 4, 2019

National Price Hike Day - April 1st 2019

April 1st is usually associated with an April fool joke, but this year it is probably going to be a bit shadowed by price hikes on energy, TV licences, stamps, Easter eggs and many more bills affecting the average household by over £100 a year. They're calling it National Price Hike Day 2019. #NationalPriceHikeDay

Rising Energy Bills? Don’t get mad get even.

The energy bills of millions of households increased by a whopping 10% on 1st April as a change to Ofgem’s ‘price cap’ allowed energy suppliers to charge an extra £117 per year to customers with typical usage. To understand why this has happened and find out how to get on the best energy deal we caught up with Andrew Mostert, Energy Expert at Flipper, the UK’s first independent energy auto-switcher.

Firstly, can you explain what the ‘Price Cap’ is?

The ‘cap’ isn’t a limit on the total amount your supplier can charge you. It just sets how much they can charge per unit of energy if you are on their standard tariff. When people say the ‘cap’ is £1,254 per year that’s what someone with ‘typical’ energy usage will pay, with Ofgem saying the typical usage is 12,000 kWh of Gas and 3,100 kWH of Electricity per year. The amount you’ll actually pay still depends on how much energy you use, so could still be much higher than this figure.

But if it’s a ‘cap’, why has it gone up?

The cap is only set for a few months at a time and the level it’s set at is partly determined by the wholesale cost of energy, which is how much your supplier pays for the energy they sell on to you. These wholesale prices rose significantly towards the end of last year, so Ofgem announced that the level of the cap would need to rise from April.

Wholesale price chart - Ofgem 2019

Do suppliers have to increase prices if the cap goes up?

The ‘Big 6’ suppliers claimed they had to in order to remain profitable. Given there are tariffs available that are hundreds of pounds cheaper than the level of the cap it’s hard to believe this is the case.

It’s also important to remember that the cap only applies to default and standard variable tariffs, which is what 2 out of 5 UK households are on (around 15 million households in the UK). If you’re on a Fixed rate deal or a Green tariff you could be paying more than the cap level as suppliers are free to price these however they want.

So what should we do?

Switch. Ofgem themselves recommend shopping around to find the best energy offers as this will save you more money than relying on the price cap to limit your bill. Remember, the cap is there to try and ensure customers who stick with their supplier pay a ‘fair’ price, it’s not intended to be the ‘best deal’ you can get. Synergy research surveyed around 14000 people to find that 45% of consumers have only switched once in the last 10 years - and over 50% of consumers that have never switched before said the reason was they "can't be bothered".

Are the savings available really that big?

They certainly can be. We save on average £385 for our members on their first flip and in some cases we save members thousands on their annual energy bill. They're probably houses with lots of bedrooms or a hot tub, but most weeks we see some savings over £1000 for single households. A customer with typical usage will be paying £1,254 per year if they are on a tariff covered by the price cap. The best deal we can offer that customer is just £921 per year – a saving of over £300.

In the past few years we’ve saved our members a total of £10,000,000 on their energy bills by ‘auto-switching’ them to the best deals, continuously. You can’t rely on Ofgem and their ‘price cap’ to make sure you’re on the best deal, but we know that regularly checking and switching yourself isn’t any fun, and that's where Flipper comes in. We do it all for you automatically, for effortless savings on your energy bills, forever.

Take a look at how much you can save and start flipping.

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