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What happened to the new energy price cap?

Around fifteen million households will see an average £117 hike in energy bills, starting from April, with regulator Ofgem announcing an increase in its price cap on its default tariffs.

This has been blamed on higher wholesale gas and electricity costs, with the cap for a typical home set to rise to 1,254 pounds from 1,137 pounds for customers on the most commonly used tariffs.

Ofgem calculates the cap using a formula that includes wholesale gas prices, energy suppliers network costs and costs of government policies, such as renewable power subsidies.

The price cap policy on expensive default tariffs, introduced with the intention of supporting the working-class following years of pressure from the house of commons, has only been in place since New Year’s Day.

Ofgem have claimed that even after the April increase, those on the most common deals will still be saving around £75 to £100 a year on average because to this price cap.

The regulator’s chief executive, Dermot Nolan, said: “Under the caps, households on default tariffs are protected and will always pay a fair price for their energy, even though the levels will increase from 1 April.

“We can assure these customers that they remain protected from being overcharged for their energy and that these increases are only due to actual rises in energy costs, rather than excess charges from supplier profiteering.”

The move has still been widely condemned, however, with numerous politicians voicing their displeasure of the change.

Shadow business secretary Rebecca Long Bailey said: “This Government is resting on its laurels while big energy companies are ripping off their customers.

“Had Labour’s price cap been introduced after the 2017 general election, it would have saved 13 million households over £3 billion – that’s £230 each.

“Instead, the Conservatives dithered and delayed for almost two years, allowing the big energy companies to introduce an unprecedented number of price hikes.

“This latest increase is a further blow for the millions of households already struggling with their bills this winter.”

Price comparison sites aren’t happy with the change either, with Stephen Murray, energy expert at price comparison site MoneySuperMarket, saying: “The cap was put in place to protect consumers from overpaying on their energy, but right now it’s doing anything but that.

“It’s only taken five weeks for it all to unravel, and households up and down the country will be scratching their heads in confusion and wondering how the claims of ‘fair prices’ and ‘£76 per year saving’ have disappeared, and so quickly.”

The price cap was designed solve the issue of customers staying with one company gradually having to pay more and more for their energy. Those who switch often to find the cheapest provider, and those on fixed rate tariffs aren’t affected by the changes as much.

Ofgem has also announced an increase in a different cap for the four million customers using pre-payment meters.

Their annual bills will be expected to go up by around £106, to £1,242.

Ofgem is planning on re-setting the price cap twice a year with the next change due to be announced in August and fully being implemented on 1 October.

It has also been announced by Ofgem that capped prices will only go up when the cost of energy as a whole rises.

“Equally when costs fall consumers’ bills are cut as suppliers are prevented from keeping prices higher for longer than necessary,” the regulator said.

The exclusive group of Britain’s largest and most powerful suppliers, known as the “Big Six,” were the ones to complain that the cap was initially set too low.

The big six energy powerhouse is made up of Centrica’s British Gas, SSE, Iberdrola’s Scottish Power, Innogy’s npower, E.ON and EDF Energy.

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