As the nation struggles to cope financially amid the global pandemic, it has been announced that energy prices will increase for millions of households in April. This comes as a massive blow for customers, with many already feeling the pandemic's financial impact and struggling to cope with a reduced income.
The energy price hikes will have a significant impact in the current challenging environment. Many workers are on reduced salaries because they are still furloughed. Many others have lost their jobs over recent months due to business closures and cutbacks. It will also cause further hardship for many older energy customers who are on fixed state pensions.
Typical energy customers will see a £96 annual increase
Ofgem, the energy regulator, said the price cap on domestic energy deals was to be raised to try to help cover extra costs from suppliers. The move means that the typical energy customer could see their annual energy bill rise by £96. The cap for those on prepayment meters will increase by £87.
According to Ofgem officials, the increased wholesale cost of energy is the cause of the increase. The regulator did add that consumers could look at switching to cheaper deals and providers and that the price cap resulted in savings of £100 per year.
However, some officials have questioned the point of having a price cap, stating that the increase would put the most vulnerable households at risk.
Peter Earl from Comparethemarket.com said, "Raising energy costs for millions of households by an average of £96 is an extraordinary move in the current environment. It calls into question the whole point of a price cap which was designed to protect the most vulnerable households."
Support for households facing financial stress
Another critical point that has been raised is that the energy hikes will come just as financial support from the government comes to an end. This could put vast numbers of households in an even worse situation, as their outgoings will rise just as their income drops.
However, one Ofgem official said that suppliers were expected to be fair about their price increases, and they need to ensure support is available for households facing financial difficulties. He also added that it was better for the price increase to come in April when the weather improved than during the winter when homes use more energy.