E.On becomes first major energy firm to hike tariffs by maximum allowed, days after Ofgem unveils new price cap
- E.On will increase prices for standard variable tariffs by 10.3% on average
- E.On has 1.8m customers on standard variable tariffs
- More energy suppliers are expected to follow suit
E.On has become the first major energy supplier to hike tariffs in response to the new cap on standard variable tariffs coming into force from the beginning of April.
The Germany-based energy firm has confirmed it will increase prices for the 1.8million customers on SVTs by 10.3 per cent on average – the maximum rate of increase allowed under the new price cap.
The price hike from one of the Big Six comes as last week energy regulator Ofgem announced that customers on SVTs will see the price cap increase by £117, or 10.3 per cent, to £1,254 per year.
Energy bills rising: E.On is hiking standard variable tariffs by 10.3% – the maximum allowed
Ofgem implemented price caps to protect households who never switch, but due to rising wholesale energy costs the caps have shifted significantly higher.
More energy suppliers are expected to follow suit and hike tariffs to the maximum allowed under the new price cap.
The increase in price cap will continue to be reviewed every six months, so the next review will be in October.
An E.On spokesperson said: ‘Ofgem’s energy market price cap review set out that price cap levels would increase, driven by rising wholesale and other costs.
‘In line with that, we’ll be making changes to our standard variable tariff prices from April 1 and expect to see similar movements across the energy industry.
‘Prices will not change for existing customers until then.
‘Over the coming weeks we’ll be writing to affected customers explaining what the changes will mean for them and encouraging them to choose the best tariff for their needs.’
Victoria Arrington at Energy Helpline, said: ‘There is little doubt that this is just the beginning of a crushing wave of price hikes we are expecting across the Big Six.
‘It is incredibly important that customers act as soon as possible to secure a great deal – as suppliers across the board are all but sure to follow suit.
‘This £117 hike from E.On could only be the beginning of a costly trend across the Big Six. But you can protect yourself from this 10 per cent price hike.
‘All you have to do is take a few minutes to find a cheaper energy tariff. If you switch today, you could potentially save £300 on your energy – and protect yourself from rate hikes big and small.’
Overall, the price hike is expected to collectively cost energy customers £1.3billion.
The ceiling price under the Ofgem capping regime is per unit of energy used, not on the size of a bill.
According to Ofgem and other consumer groups, switching supplier could save the average household nearly £200 a year, but yet millions remain on SVTs.
Households are also being encouraged to change onto a fixed tariff, protecting them from any energy price rises.
Peter Earl, head of energy at Compare the Market, said: ‘The revised price cap level will shock people and usher in a spring of discontent for millions when it comes into force on 1 April.
‘A rise was expected, but a hike of £117 represents a brutal hit to households on variable and default tariffs.
‘This increase is a reminder that as Ofgem continues to review the cap, there could be more rises to come in the future.’
New research suggests those in their 50s are overpaying for energy to the tune of £500 a year.
Those in their 60s and 70s are overpaying by more than £400 a year. Even the gap between what younger bill-payers do and could pay is wide – at £300.