Gas and electricity bills could rise by £21 a year to cover ‘bad coronavirus debts’

Gas and electricity bills could rise by £21 a year for households from the beginning of April, under new proposals by Ofgem.

The regulator has suggested increasing the maximum amount Brits can be charged on their bills to cover debts following the coronavirus crisis.

Ofgem said it’s considering a £21 per household hike to the default price cap when it next comes up for review, which would affect millions of households.

This would come on top of any other changes made to the amount energy companies can charge customers on their default rates.

The current price cap, which runs between October 2020 and the end of March 2021, is set at £1,042 per household on default energy deals.

The prepayment meter price cap is set to end in December 2020.

After this, customers will be protected by a prepayment cap level in the default price cap, which will remain the same until April next year.

The price caps currently help 15million households, of which 11million are on default tariffs.

The increase will let them recover some of the estimated £200million of bad debt that customers have collected.

Consultation on the proposals will run until December 21, and Ofgem will then share its decision in February before announcing the new price cap.

Ofgem reviews this cap every six months, and was already widely expected to hike the cap in February.

It comes despite energy prices coming down in the past three reviews.

However, wholesale energy prices have recovered from the lows they hit earlier this year when demand for fuel collapsed due to the pandemic.

Many of Britain’s biggest energy companies have also been forced to lay off thousands of workers while under pressure from Covid.

E.On became the latest this week when it announced around 695 jobs will be cut.

It followed Centrica, which announced 5,000 cuts in June, and Ovo, which said it would cut 2,600 jobs in May.

Richard Neudegg, head of regulation at Uswitch, said: “While it can be worrying for households to see signs that the price cap will likely increase, it’s important for people to know that there are always better deals out there.

“For more than half of customers who are on standard variable or default tariffs, the best way to ensure you’re not overpaying for your energy is by switching to a fixed, cheaper deal.

“The difference between today’s energy price cap, which most default tariffs track, and the cheapest fixed deal currently available is £220.”

The price cap was introduced by Theresa May back in January last year and was initially set at £1,137.

But just three months later it rose by another £117 causing the Big Six suppliers – British Gas, EDF Energy, EON, Npower, Scottish Power and SSE – to hike their prices to the limit.

They were even accused of running a cartel by charging very similar prices.