Energy bills rise could see customers trapped in ‘vicious circle of debt’
April’s price cap increase could plunge consumers into debt that suppliers have been unable to recover during the pandemic, according to Uswitch.com.
Industry observers have responded to Ofgem’s announcement today that energy bills will rise by £93 to pre-pandemic levels from 1 April.
The price cap, which will affect 11 million default tariff customers, has been given the go-ahead by Ofgem to cover high levels of debt from customers unable to pay their bills during the pandemic.
Richard Neudegg, head of regulation at Uswitch.com, said: “The pandemic has already placed many households under great financial strain.
“News of the price cap rising by an average of £96 from April will be a bitter pill to swallow for the 11 million default tariff customers with standard meters, many of whom are already struggling to make ends meet.
“With more of us at home, usage remains high and energy costs hike, there’s a very real danger that the rising price cap will end up trapping households on default tariffs into a vicious circle of energy debt.”
The price cap will increase to £1,138 for default tariff customers, while those using a payment meter should expect an £87 rise.
Heavy blow
Citizens Advice has described the announcement as a ‘heavy blow’ to households already hit by Covid-19, criticising the timing of the rise.
Alistair Cromwell, acting CEO of Citizens Advice, said: “This increase will be a heavy blow to a lot of households.
“For many people on Universal Credit, it will come at the same time as the £20 a week increase to the benefit is set to end.
“With a tough jobs market and essential bills rising, now is not the time for the government to cut this vital lifeline.”
Shop around
In December, Citizens Advice research showed that 2.1 million households were behind on their energy bills, 600,000 more than in February 2020.
Customers who want to avoid the increase are urged to shop around ahead of the rise on 1 April.
Martin Lewis, founder of MoneySavingExpert.com, told those heading to comparison websites to consider that the saving shown will relate to the current price cap level.
Lewis said: “While I’d strongly urge everyone on a standard tariff to compare and find their cheapest supplier, don’t be put off by the relatively small saving shown.
“In reality, it is likely to be much bigger.”