ENERGY bill are to soar by a whopping £693 a year for millions of Brits after a new price cap was confirmed today.
Ofgem this morning announced that the price cap will be raised by 54% – a figure even higher than many analysts predicted.
The new energy price cap comes into effect on April 1 and will take the average household bill to £1,971 a year.
The average household bill already climbed to £1,277 in October, meaning today’s changes will only compound the misery for millions of families.
Meanwhile, prepayment customers will see an increase of £708 from £1,309 to £2,017.
Jonathan Brearley, chief executive of energy regulator Ofgem, said: “We know this rise will be extremely worrying for many people, especially those who are struggling to make ends meet, and Ofgem will ensure energy companies support their customers in any way they can.”
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‘Number 1 issue on people’s minds is the rising cost of living’
The Chancellor told the Commons: “Right now I know the number 1 issue on people’s minds is the rising cost of living.
“Just as the Government stood behind the British people through the pandemic so we will help people deal with one of the biggest costs they now face – energy.
“Without Government action this would be incredibly tough for millions of hard working families so the Government is going to step in to directly help people manage those extra costs.”
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‘It is not suitable to keep the price of energy artificially low’
Rish Sunak has said: “It is not suitable to keep the price of energy artificially low.
“For me to stand here and pretend we don’t have to adjust to pay higher prices we would be wrong and dishonest.”
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Rishi Sunak announcement
Rishi Sunak has taken to the stand.
He said “As we emerge from the depth of the worst recession in 300 years, we should be proud of the economic record.
“But for all the progress we are making, the job is not yet done.
“Without government action this would be incredibly tough for millions of families.”
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Official statement from Ofgem
Ofgem statement “The energy price cap will increase from 1 April for approximately 22 million customers. Those on default tariffs paying by direct debit will see an increase of £693 from £1,277 to £1,971 per year (difference due to rounding). Prepayment customers will see an increase of £708 from £1,309 to £2,017.
“The increase is driven by a record rise in global gas prices over the last 6 months, with wholesale prices quadrupling in the last year.
“It will affect default tariff customers who haven’t switched to a fixed deal and those who remain with their new supplier after their previous supplier exited the market.
“The price cap is updated twice a year and tracks wholesale energy and other costs.”
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How is the cap calculated?
Different factors affect how much suppliers change what they charge you to meet the cap including where you live, your type of energy meter, and how you pay – by prepayment, direct debit or standard credit.
Your total energy usage will affect your total bill too.
But your supplier must automatically apply the price cap if you are on a default tariff.
You can often save money by shopping around as not all suppliers will charge the maximum amount.
But since the recent energy crisis has crippled most of the industry, many providers have taken up the full cap, and little competition has been seen between them.
Previous predictions from consultancy firm Cornwall Insight said the default tariff price cap could hit an eye-watering £2,240 by October this year when the next bout of changes comes into force.
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What if you are struggling to pay council tax?
The Treasury is today expected to announce a £150 rebate for everyone on bands A to D as an extra measure of support for those on the lowest incomes.
However the funding hasn’t yet been confirmed.
You should also check whether you’re eligible for a council tax discount or exemption.
For example, single people can get 25% off their bills while students don’t have to pay at all.
Struggling homeowners could get thousands of pounds in council tax debts wiped as councils clear record levels of arrears.
To do this, you must fill out a Section 13A application form, and it’s down to your council to decide whether to clear your debts.
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Ofgem announce rise of £693
The increase had been widely expected amid soaring wholesale costs and a string of energy supplier collapses.
But it means households are now paying more than double what they were a year ago for energy.
Since the beginning of the Autumn season last year, households have been forking out hundreds more than they had to before, to foot their energy bills.
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50% Increase
Energy regulator Ofgem has today confirmed that the price cap will rise to £1,971 from April.
It was only last October that bill payers saw costs go up by £139 a year at the last price cap review.
Today’s cap adds another 50% to the average energy bill and means families are being forced to the brink as the cost of living crisis bites.
More misery could come later this year when the price cap is reviewed again, as it is adjusted every six months.
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Energy price cap confirmed
Brits will see their energy bills soar by a record £693 a year after the new price cap was confirmed today.
The energy price cap, which comes into effect on April 1, will take the average household bill to £1,971 a year.
The energy price cap climbed to £1,277 in October, but today was increased again as suppliers and households alike struggle to cope with soaring costs.
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How can I watch Rishi Sunak’s speech today?
The Sun will be streaming Mr Sunak’s speech later today.
Be sure to check the website to tune in.
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Will council tax rise?
It’s safe to say your council tax is likely to go up by around 2.5 to 3%.
That’s because ministers are set to allow councils to charge a 2% increase – that’s on top of a 1% hike that will fund social care.
Hargreaves Lansdown senior personal finance analyst Sarah Coles told The Sun: “It will be up to individual councils how much they take advantage of this, but there’s a strong likelihood that many of them will.
“They’re wrestling with the enormous rise in the cost of social care, so they may well raise council tax as much as they possibly can.”
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Energy bill rebate
Mr Sunak is also expected to reveal plans to dish out £200 rebates on their energy bills.
It is effectively a discount on energy bills, which are set to soar by £600 as the price is cap is raised from £1,200 to near £2,000.
Ministers will underwrite the loans, which will be paid to customers buy providers and then recouped over time.
The “rebate and clawback” scheme will ease the pressure on bill-payers in the short term – but customers will have to pay back the cash eventually.
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What will Rishi Sunak announce on energy prices?
He is expected to unveil financial support for struggling families bracing for a devastating squeeze come April.
This will likely be in the form of state-backed loans, giving all households a £200 discount off their energy bills.
This could increase to £500 for those struggling the most.
Mr Sunak may give hard-up households in Council Tax bands A to C rebates.
These would be funded by government grants under targeted measures for poorer Brits.
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Council tax cuts
Mr Sunak is expected to slash council tax bills for struggling Brits to help offset soaring bills.
Those in council tax bands A to D will likely receive rebates on their payments, funded with government grants.
The Chancellor – who will fork out about £9billion for the move – is expected to lay out plans for more than 15 million of the poorest households to receive the rebate.
It is expected around £150 will be knocked off people’s council tax, with Mr Sunak due to flesh out plans to Parliament at 11am.
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What is happening today?
Timings to keep an eye on today:
- 11AM – Ofgem will announce the new energy price cap which will take effect in April.
- Not long after – Chancellor Rishi Sunak will set out how the government plans to help households with the cost of that price hike
- Midday – The Bank of England will announce whether the cost of borrowing will get more expensive as they announce their interest rate decision.
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What time is Chancellor’s energy price hike speech today?
Energy regulator Ofgem is expected to reveal the new energy price cap for average dual-fuel bills at 11am today, February 3, 2022.
It is anticipated to rise by up to 50 per cent, meaning the average bill could hit almost £2,000 a year.
Mr Sunak’s speech will take place following the announcement at 5pm.
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Does the energy price cap save you money?
Ofgem sets the price cap twice a year, each for a six-month period.
For example, suppliers were only able to charge up to £1,138 on their default tariffs between April and September 2021 based on a cap that was announced in February last year.
The energy regulator then announced in August that the price cap would rise by £139 from October 1 to £1,277 – the highest since the cap launched in January 2019.
This cap lasts until the end of March 2022, when a new limit will come into force from April.It means your costs actually rise if you are on a default deal.
It is usually possible to save money by shopping around, but this is unlikely to be an option for 2022 as energy prices soar.
Rates are rising across the board at the moment as all suppliers are hit by rising gas prices and increased demand.
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Energy price cap started in 2019
The energy cap was introduced in January 2019 and is set by industry regulator Ofgem to ensure customers aren’t ripped off when their contracts end.
It sets a limit on how much suppliers can charge for out-of-contract or default energy deals based on factors such as wholesale energy market costs.
The total savings for individual customers will depend on how much energy they use, the price of their current tariff, whether they have both gas and electricity and how they pay for their energy.
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Interest rates expected to increase
The Bank of England will update its forecasts today and is expected to hike interest rates by at least 0.25 per cent to 0.5 per cent.
But some economists have called for an increase to 0.75 per cent to tackle spiralling inflation which could hit six per cent by April.
Yesterday annual shop price inflation jumped from 0.8 per cent in December to 1.5 per cent in January, according to the latest BRC-NielsenIQ shop price index.
It said the increase was at its highest rate since 2012. Food price inflation rose from 2.4 per cent in December to 2.7 per cent in January, as price rises reached the highest rate since October 2013.
Non-food inflation rose to 0.9 per cent in January compared to 0.2 per cent in December.
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Warm Homes Discount could be extended
In a bid to stop the poorest Brits choosing between heating and eating, Rishi is also expected to extend the Warm Homes Discount too.
The Treasury is expected to announce a £150 rebate on council tax for everyone on bands A to D – costing the Exchequer at least £9billion – as an extra measure of support for those on the lowest incomes.
Last night critics rounded on the plans, which were still being ironed out yesterday, saying the help was just a drop in the ocean for millions of families.
One Tory minister admitted last night: “Whatever the plan is, it just won’t cover the whole rise.”
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Petrol prices also expected to rise
Pump prices are expected to rise again soon as the cost of crude oil sticks at around $90 a barrel, a seven-year high. It means the costs of petrol and diesel have risen by 26.8 per cent in a year.
Given that the average household spends £22.30 per week on fuel, that means an extra £5.98 a week, or £311 a year. RAC fuel spokesman Simon Williams warned yesterday: “Storm clouds are gathering, however.
“With oil now having traded above $90 for a week – the highest price for more than seven years — wholesale fuel costs are once again increasing, which will undoubtedly lead to retailers putting up forecourt prices.
“Our message to the biggest retailers, which lead the market, is to treat drivers with respect by fairly reflecting the movement in the wholesale fuel market and not taking overly high margins.”
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“Rebate and Repay” scheme
Under pressure to scrap VAT on energy bills, Rishi Sunak will today announce a series of measures to try to ease the pain for hard-pressed families.
He will lay out a major “Rebate and Repay” scheme to give every household in the country cash back.
Ministers will underwrite billions of pounds worth of loans to energy firms to dish out to their customers — to be recouped over time.
The so-called “smoothing” mechanism will mean Brits pay less now when prices are high, but face paying back huge sums over several years.
And the winter scheme may only be extended from the end of the year, leaving months of pain for struggling households.
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Planned rise on April 1st
Households face a planned rise on National Insurance, council tax hikes and higher energy bills from April 1.
Soaring inflation is adding £180 a year to grocery bills and soaring crude oil prices are pushing up prices at the pumps.
Energy watchdog Ofgem was forced to bring forward its planned price cap rise on gas and electric bills to today, as the government scrambles to help Brits with the cost of living crisis.
Suppliers will be allowed to hike the basic tariff for 22 million households, meaning families are set for huge increases in bills.
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‘Millions are waking up to the reality of huge energy price rise’
Consumer expert Martyn James said: “It’s going to be Black Thursday. Millions of households across the UK are waking up to the reality of huge energy price rise hits, while inflation inches ever up and all the main bills we pay look set to rise.
“Whatever you do, don’t panic – there is help out there. But the Government need to know that it’s nowhere near enough for millions of hard-up people.”
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Brits to be hit hard
Brits face a triple-whammy of…
- Average gas and electric bills hitting £2,000 a year as the Government’s price cap is raised.
- Mortgage payments going up as interest rates set to double from 0.25 per cent to 0.5 per cent – the second increase in two months.
- Shoppers hit by the highest price rises in nearly a decade
- Petrol prices to rocket to record levels.
