Energy bills will rise for 22 million households in April this year, as regulator Ofgem confirmed an increase to the new price cap level.
A number of factors have contributed to the rise, including increased demand, the global pandemic causing a backlog of maintenance at power plants and political tensions in countries that produce gas.
In response to the wholesale price increases, energy companies will increase the energy price cap from 1 April 2022.
What is the energy price cap?
The independent energy regulator Ofgem reviews and sets the maximum amount that energy providers can charge per unit of energy. It is calculated based on the amount of energy a ‘typical’ customer uses in a year.
The energy price cap will rise by 54% from 1 April 2022. On typical use, it’s set to increase from £1,277 per year to £1,971 per year – adding around £693 per year to the average household bill.
The rise in the level of the price cap comes as no surprise, and we’ve been warning of a substantial hike for months due to record gas prices firms have had to pay over the last six months.
It’s important to note that those amounts aren’t the maximum a customer can pay. If you use more than the ‘typical’ customer, your provider can charge you more. It is just that those figures are used to calculate how much to charge you for each unit of energy to use.
For more information visit https://www.ofgem.gov.uk/information-consumers/energy-advice-households/check-if-energy-price-cap-affects-you
How does this affect me?
In short, you are likely to see an even bigger increase in your energy bills. You may have already noticed your bills are more expensive.
The high cost of wholesale energy also means that energy providers are unable to offer customers any deals, so whereas previously you may have been able to shop around for a better deal and switch, this is no longer the case.
It has also caused a number of smaller energy providers to go bust in recent months. This has meant millions of people having to find a new supplier and in most cases there has been an increase in their new tariff .
What can I do?
Unfortunately, until the wholesale price of gas comes down, options are quite limited. You’re unlikely to save much money if you go looking for another provider at this moment in time. What you can do though is contact your provider to ensure that you are definitely on the cheapest tariff they provide and not just their standard rate. Contact our Money Advice team if you are struggling to pay your energy bills and we can undertake a financial health check. The Money Advice team can maximise your income and help you make better use of it.
Energy providers often give cheaper rates to people who pay by direct debit, so if you are able to do so, it is worth setting up your payments this way.
The way you use your energy can make a significant difference to your bills. Using a smart thermostat to set heating schedules can help heat your home much more efficiently. Using energy saving lightbulbs and ensuring lights and appliances are switched off when you’re not in the room can bring your overall energy bills down.
It’s also worth submitting meter readings as regularly as you can. If your tariff is estimated, you could be overpaying, in which case your supplier needs to refund you. If you’re underpaying, you need to find out sooner rather than later to avoid a hefty lump sum once your supplier corrects the underpayment.
You might be able to take advantage of certain benefits, grants and help offered by the government and energy suppliers.
The Warm Homes Discount Scheme
You may be eligible for The Warm Homes Discount Scheme. This is a government scheme that provides eligible customers with a one-off £140 discount off their electricity bills. The discount is available until March 2022.
Contact your energy supplier to check if you’re eligible for the discount. For more information visit www.gov.uk/the-warm-home-discount-scheme
Winter Fuel Payment
If you were born on or before 26 September 1955 you could get between £100 and £300 to help you pay your heating bills. This is known as a ‘Winter Fuel Payment’. The deadline for you to make a claim for winter 2021 to 2022 is 31 March 2022.
Other Support
Help and support is available through suppliers like British Gas, E.ON and EDF, if you are struggling to pay your bills. Details of grants and vouchers can be found on the Citizens Advice page.
More advice on how to save money on your energy bills is also included in our helpful Energy Saving Guide.
