New Ofgem cap encourages E.On to raise energy prices

Energy supplier E.On has become the first major company to announce a price increase in response to the new limit set by the regulator for the beginning of April.

On Thursday, Ofgem said it would allow providers to charge more to those who apply default rates because of rising wholesale costs.

E. It has now confirmed that it would increase its prices by 10% for 1.8 million customers.

Other members of the six largest suppliers should do the same.

More than half of UK households will likely see the cost of energy rise by a similar amount in April. This would mean an increase of £ 117 for those who typically consume energy with a default or variable rate.

Ofgem sets maximum prices for gas and electricity to people who have not changed supplier. It sets the ceiling for households in England, Wales and Scotland. Northern Ireland has a separate energy regulator and its own ceiling price.

Ofgem said that from April, suppliers could cover the higher costs they face in the wholesale market by raising their prices.

About 11 million households are in default or at standard variable rates and should be affected. An additional four million on prepayment meters will also see prices rise, generally by more than £ 100.

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E.On was the first to announce an increase in its customers in April, claiming that it was aligning with the additional allocation granted by Ofgem to suppliers.

"Over the next few weeks, we will write to the relevant customers to explain what the changes will entail for them and to encourage them to choose the rate most suited to their needs," said a spokeswoman for E. .We.

All major suppliers have set their standard variable rates at the price ceiling or at a value very close to it. They should do the same in time for the new cap to take effect in April.

Rik Smith, of the Uswitch price comparison site, said: "Standard rates were a bad deal at the old cap and they would become an even worse deal at the new level."

Ofgem points out that, without the existence of the ceiling, households would have paid more, according to his research.