MILLIONS of UK households have seen their home bills shoot up as a direct result of the price of energy having rocketed too.
Energy regulator Ofgem increased the Energy Price Cap to £1,277 at the start of October, adding £139 to the average bill, and households have been suffering ever since.
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Prepayment meter customers saw their bills jump £153 to £1,309.
It meant around 11 million households on a standard or variable energy tariff and those using a prepayment meters saw their bills jump 12%.
The hike in October marked the second time this year that prices went up, following an increase of £96 in April.
It means the average household has seen a massive £235 added to their energy bills over the past year.
Soaring wholesale energy prices are to blame.
Demand for natural gas recovered after the pandemic at a faster rate than supply has been able to keep up with.
What is the Energy Price Cap?
The price cap was introduced in January 2019 as a way to ensure fair prices for customers.
It is reviewed every six months by the energy regulator Ofgem and is supposed to protect consumers from overpaying for energy.
But households could face even more energy bill hikes as the price cap could be adjusted more often than this.
The price cap applies to default energy tariffs and prepayment meters. It does not apply if you are on a fixed-term energy tariff or have chosen a standard variable green energy tariff which Ofgem has made exempt from the cap.
The price cap limits what an energy provider can charge for its default tariffs, including the standing charge and cost per unit for electricity and gas (known as the kWh).
The price cap is only supposed to be a temporary measure, which will be removed once the regulator is satisfied the industry is competitive.
It is due to end by 2023 at the latest, although the government will make the final decision on when.
How is my energy bill calculated?
It’s not just your gas and electricity usage you’re paying for when it comes to energy bills.
Looking at the cost breakdown of the typical dual fuel energy tariff for the coming winter, Ofgem previously estimated that some £528 is swallowed up by wholesale energy costs.
That’s how much a supplier has to pay to get the gas and electricity to supply households.
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This was up a massive 42% compared with summer 2021, highlighting just how much wholesale prices have soared.
Network costs, such as maintaining pipes and wires, stayed the same at £268.
Operating costs increased 3% to £203 and policy costs, which relate to government schemes to save energy, reduce emissions and encourage take-up of renewable energy, have slipped 8% to £159.
Other factors that determine your energy costs include where you live, your type of energy meter, and whether you pay by direct debit, prepayment or standard credit.
Will my bill go up?
When the price cap was announced, a number of major energy providers revealed their price increases.
SSE customers saw their bills increase by an average of 12.26% to £1,276.49 after October 1, according to GoCompare Energy.
EDF customers saw their bills rise on average by 12.24% to £1,277.22.
You can check with your provider to see if you will be affected.
Previously GoCompare Energy estimated that shopping around could save households up to £302 on their energy bills.
But as the price cap forced many providers to hike up prices or face collapse, there’s little to no competition on the market currently – making switching a more difficult practice.
Devastatingly, as many as 26 have already met that fate, thinning out the market as the winter months hit.
Ofgem Chief Exec Jonathan Brearley admits biggest rise in energy price cap ‘is going to be difficult for many families’
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