Millions of people across the country are about to face a spike in energy prices, with many concerned about how much their bills may rise.

From 2021, energy companies have been going bust as rising gas prices lead to a global supply crisis, which in turn led to more expensive energy costs.

Ofgem – the energy regulator for England, Wales and Scotland – has revealed a new price cap that will apply to average dual-fuel bills.

Coupled with a rise in the cost of living, the increased energy prices are understandably a worry for many households.

But what exactly is the energy price cap, and how much will bills rise by?

What is the energy price cap?

The energy price cap is the maximum figure that consumers can be charged on a variable dual-fuel rate for typical usage of gas and electricity for a six month period.

The cap is set by Ofgem and applies if you’re on a default energy tariff, whether you pay by direct debit, standard credit or a prepayment meter. 

It won’t apply if you:

• Are on a fixed-term energy tariff
• Have chosen a standard variable green energy tariff Ofgem has exempted from the cap.

Essentially, if you’re not on a fixed tariff with an energy supplier for a set period of time, it means that your energy bill can only rise up to the cap.

It’s the rates per unit that are capped, so if you use more energy, you’ll pay more, as MoneySupermarket.com explains here.

Ofgem estimates that 22 million households are currently on variable rates, the number went up by around two million customers whose suppliers went bust over the last year.

How much will my bills rise by?

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Ofcom announced that the energy cap will be raised by 54% from April 1, 2022, to £1,971.

The energy cap has gone up by £693 from October 2021, where it was set to a maximum of £1,277 per year. This means that the average energy bill will increase by this amount annually.

The BBC report that a further 4.5 million people on prepayment meters will see a bigger increase of £708 a year.

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