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Prepay Energy Customers Face Rise in Bills from April 2018

Households across the UK may see a rise in their energy bills as Ofgem raises the price cap for prepay customers by 5.6 per cent.

What is the price cap?

The safeguard tariff, or price cap as it has been dubbed, covers all domestic prepayment customers (except those with a fully interoperable smart meter) as well as vulnerable households to whom the cap also applies. It was extended back in February 2018 to a further one million homes across the UK. You can read more about this on the official Ofgem website.

The safeguard tariff is intended to protect consumers against unfair energy tariff hikes, which suppliers say are coming from the increasing cost of meeting Government policy schemes and buying their energy through the wholesale market (which is rising).

Unfortunately the savings these more vulnerable households can make will reduce dramatically with the new price cap, set to come in from 1st April 2018, as many energy suppliers have chosen to raise their prices just short of the new cap.

How much will bills rise?

The average dual-fuel bill will increase from £1,031 to £1,089 per year, a rise of £58. Many of the Big Six suppliers including E.on, EDF and Npower, have raised prices of their tariffs just £1 shy of the cap at £1,088.

Which? has explained that according to their research ‘although your bills could rise, they will still be £42 cheaper per year than the average Big Six standard variable tariff’.

What can I do about it?

Martin Lewis of Money Saving Expert suggests customers carry out a comparison to try and find their cheapest option on a payment meter plan. Alternatively switching to a billed meter could be a great move if you are able to do so.

He commented on the rise “The rise in the price cap leaves the whole thing feeling somewhat flaccid. For someone on typical bills of £1,132 a year, paying by direct debit, it is a reduction of just £43 – and even for those on the worst big six tariff it’s just £77.

“Contrast that to the £300+ annual savings available to those who switch, and it raises a worry that a continued erosion of the reduction will leave this as a dangerous halfway house giving vulnerable customers false comfort that they are not being ripped off, while disinclining them from engaging in the switching market where they’d save large.”

Other ways to save on home heating

There are a selection of government grants available to vulnerable households on low income and in receipt of benefits. You can learn more about this in our guide to boiler, central heating & insulation grants 2018.

There are also many ways, both long and short term, to save energy in the home and keep your property warmer in our guide to energy saving.

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