What You Need to Know About the Ofgem Retail Price Cap

With the recent announcement that UK energy regulator Ofgem will raise the retail price cap for electricity and gas from the first of April, many have speculated that energy prices could rise across the board this year. 

Ofgem retail price cap increase 

While the Ofgem retail price cap relates to domestic customers only, it does point to some of the issues faced by the UK energy industry during a uniquely challenging 2020. During this time, the COVID-19 pandemic flipped the script on expected energy demand and supply.  

A return to “normal” on the horizon

COVID-19 vaccination roll-outs are underway, and Prime Minister Boris Johnson has indicated that all COVID restrictions could be lifted as soon as June this year. There is growing optimism that we have turned a corner and that a return to normal is on the cards this year. 

While there are plans for business support schemes to continue until the effects of the pandemic no longer linger in the commercial sector, it would be unrealistic for suppliers to keep rates low once recovery is fully underway. 

The impact of COVID-19 on the energy industry

COVID-19 has created challenges for most UK business. The energy industry has not been exempt from this.

Smarter Business Head of Mid-Market Solutions, Tim Sealy-Fisher, believes that increasing price caps will help the energy industry recover from a difficult 2020:

 “Ongoing increases in the associated costs of delivering energy from generators to customers coupled with a decrease in overall all UK energy consumption has created its own set of challenges for energy supplies, particularly those well-established companies with large overheads.  

Ofgem recently approved an increase in the energy cost cap to customers to help support suppliers through this time. Unfortunately, these costs invariably are passed on to consumers.”

There could be a rise in electricity prices for commercial customers on the horizon. An increase in the price cap could also be a reflection of the once-again changing global landscape. Business owners should look at this as an opportunity to look to new energy suppliers for cost savings. 

Opportunities for consumers

While higher energy prices may be on the cards, the pandemic has created an opportunity for new suppliers to be a disruptive force in a competitive industry, said Sealy-Fisher:

“For every door that closes, another one opens. In this case, COVID-19 has created a gap in the market for new energy suppliers, who are able to disrupt the market with cost-efficient systems and technology, ensuring that the competition between suppliers remains strong.”

With over 40 registered energy suppliers in the UK market, there is plenty of choice for business owners to choose from when procuring an energy contract. 

Get help to make informed decisions 

Making the right decision when it comes to energy contracts can be difficult. That’s where using a company like Smarter Business to access and negotiate prices between suppliers has become an important part of the utility procurement process for businesses that want to find tangible savings. 

With looming energy price increases, and a return to productivity for businesses across the UK, now is the right time to start thinking about your next steps.

During a busy year where many will be looking to make up for lost ground and recoup on lost opportunities to earn, additional savings can make a world of difference. 

For expert advice on the best business electricity and gas deals, find a trusted partner. With over 40 000 satisfied customers, we’re here to help.