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How and why energy prices are increasing

On 5th February 2021, the energy regulator OFGEM announced that it will raise the ‘energy price cap’. This increases the maximum amount an energy company can charge customers for gas and electricity by nearly £100 a year.

OFGEM sets the energy price cap to ensure that customers are charged fairly, taking into account market conditions in the UK and global trends that influence wholesale costs. However, it frequently means higher costs for consumers – especially if you don’t take action.

This information explains why there is set to be an increase in the energy price cap, what it means for regular consumers and what your options are.

The price cap and what to expect

The 2021 increase in the energy price cap is a whopping 9%. For a customer on a standard variable tariff (SVT) with a medium sized household and average usage, this will mean an increase of £96 to every household’s bills.

Most energy companies will write to their customers in February and March to inform them of this increase, effective from the start of April. These higher prices will apply to companies’ default tariffs where a customer hasn’t made an ‘active choice’ (including the standard variable or fixed default tariffs). It doesn’t apply to a fixed tariff a customer has actively chosen. If you’re currently on a fixed tariff, you’ll experience this increase when your fixed term period ends - unless you take action.

Why are prices going up?

There are a few reasons. Firstly, the wholesale costs of providing energy are increasing. Having originally dipped at the start of the COVID-19 pandemic when large sections of businesses stopped work altogether, costs are now increasing as countries start to recover. This is due to higher:

The regulated energy market in the UK means that consumer prices go up and down in line with the wholesale costs. The table below shows how wholesale electricity costs have been rising June 2020. The wholesale price is closely tracked by the energy price cap.

UK Energy Day Ahead Auction Prices © Nord Pool 2020

The second reason for higher costs is strongly related to the current pandemic. With an increasing number of customers unable to pay their bills, energy companies have rising amounts of debt. It is the role of the regulator OFGEM to help prevent energy companies from going out of business, which has knock-on implications for suppliers and customers (possibly in even higher prices). By raising the price for those who are able to pay, it lowers the risk of energy companies failing.

You might have noticed that energy companies have been adjusting their offers over the last few months in preparation, in most cases withdrawing their most competitive tariffs from the market.

Take action and get a better deal – without having to switch

At, we know that 79% of people would rather get a cheaper deal from their current energy company, than go through the hassle of switching supplier. We work directly with Britain’s biggest energy companies to offer you just that - helping you save money whilst staying with your current supplier. Whilst you can’t protect yourself entirely from these increases, as your overall bill is likely to go up whoever you’re with, you can make sure you’re on the best value tariff with your supplier. This means you making an active choice. It often means fixing your price for a period of time, which can help protect against further price increases, too.

You’ll see how much your current bill is likely to be affected by these price rises. We’ll show you if there’s a better value deal to be had with your current supplier, along with two easy steps to confirm your new tariff – all without the hassle of switching. If we can’t offer you a better deal today, we’ll commit to getting back to you when we can.

You deserve to make an active choice and avoid the worst of these increases. We’re here to help keep as many pounds in your pocket as possible.

Check my Energy bill

Alex Perrin
Co-founder and CEO,