MILIONS of households are set for higher gas and electricity bills from today as the energy price cap rises.
Typical energy bills could hit £2,000 per year, here is how to prepare.
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Households have been warned about a record rise in energy bills since February when Ofgem announced the energy price cap would rise to £1,977.
The energy price cap is the typical amount customers can be charged on a default standard variable tariff.
The cap is on the unit rate that a supplier can be charged so the actual amount you pay could be higher or lower.
Ofgem announced in February that the cap would rise from £1,277 to a record £1,971 amid soaring wholesale gas prices.
This hasn’t been helped by more than 30 small energy suppliers existing the market due to rising costs, which has killed off competition in the market and left most people better off on default deals for now.
Here is what you need to know about rising bills.
Why are energy bills going up?
A range of factors have pushed energy bills up, most of which are out of the control of users.
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Increased demand as economies came out of lockdown has pushed up wholesale gas prices.
This has had an impact in two areas.
One is on the price cap, which is set based on the cost suppliers face on providing energy.
So if wholesale and supply costs rise, so can the cap.
Additionally, many suppliers have collapsed as they couldn’t cope with the higher costs of purchasing and supplying energy.
This has reduced competition in the market and means those left don’t have much leeway to offer cheaper deals as gas prices are so high.
The Russian invasion of Ukraine has also been a factor as it has pushed up gas prices amid fears of supply restrictions.
How much are bills going up by?
The energy price cap is rising from £1,277 to £1,971 from today.
That is an almost £700 increase.
But this figure is based on typical usage and the actual amount you pay will depend on how much gas and electricity you use so the actual bill could be a lot higher.
It also depends on the type of meter you have.
The lowest price cap of £1,971 applies to standard meters.
However, the price cap for pre-payment meter customers has risen from £1,309 to £2,017.
Can I switch energy provider?
Switching energy provider used to be the go-to solution for saving on your energy bills.
However, a combination of higher wholesale costs and falling competition means it is near impossible to find a deal that is cheaper than the price cap.
Experts have suggested that families could be better off sticking with a price cap deal for now.
Should I fix?
At the moment fixed tariffs are more expensive than the price cap, which limits those on standard variable tariffs.
Some suppliers have been offering cheap fixes but these usually sell out within hours of being launched.
You can fix if you want the certainty of bills not rising again – but it’s likely that you’ll be overpaying until the price cap is assessed again in October.
How can I reduce my energy bill?
Beyond switching, one way to reduce your bill is to ensure your home is as energy efficient as possible.
That may mean taking low-cost measures such as draught proofing or more pricey steps such as installing loft insulation.
This can cost thousands of pounds initially but may save you around £315 per year.
Additionally, the government has launched £5,000 grants today for people in England and Wales to replace gas boilers with heat pumps.
Regular meter readings are also a good way to keep your costs down by ensuring you are only charged for energy you use.
Many customers tried to submit readings to their suppliers yesterday ahead of the price cap change but websites of providers such as E.ON and British Gas crashed.
You can still submit your meter reading today if you’ve not done already.
We have rounded up 44 ways to cut your energy bills.
When will energy bills come down?
This may not be the last of the rises.
Further in October the next time the price cap review comes in.
Experts have predicted that bills could hit £3,000 because of the situation in Ukraine.
The Bank of England has said it doesn’t expect energy prices to fall until at least April 2023.
What support is available?
The government is trying to help people with rising energy bills as part of wider package on tackling teh cost of living crisis.
From October 2022, all domestic energy customers will get a £200 rebate on their gas and electricity bill.
However, it will need to be paid back from April 2023 with an extra £40 per year added to bills for five years.
Low-income households and those on benefits can also access energy bill support.
This includes the Winter Fuel Payment, which gives people over 65 between £100 and £300 towards the cost of keeping their homes warm during the colder months.
You should also speak to your supplier if you’re struggling with bills.
For example, British Gas has earmarked £6billion to help customers.
Older people on pension credit or other benefits may be eligible for a £140 payment towards heating costs under the warm home discount scheme.
It is also worth checking with your local council for household support grants that are aimed a people on low incomes or contact charities such as StepChange, Citizens Advice and Turn2Us.
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