Households around the UK face average energy bill rise of £693
The energy crisis the UK has been dealing with in recent months has resulted in the 54% increase in the price cap. That means that households around the UK will have to pay more for their energy supply.
The increase will take effect in April. Then, variable gas and electricity tariffs will rise by almost £700, £693 to be exact. After that, an average energy bill will be £1,971 a year so much more than the current £1,138 a year.
But why will the prices be so much higher now?
‘The latest steep rise is a result of very high global prices for gas and other fossil fuels. The rise has increased electricity prices too, because a significant proportion of our electricity comes from gas fired power stations – around 51% of all electricity in the UK’, Energy Saving Trust explains.
As energy consumers, there is not much that households can do about the change. What everyone can do, however, is try to increase their energy efficiency in their homes. Consuming less energy means lower energy bills, even if the unit prices are higher.
What is the energy price cap?
In simple terms, the energy price cap is the maximum amount that energy suppliers can charge for the energy they supply to customers. The energy price cap was introduced by Ofgem in January 2019 to prevent suppliers from overcharging clients. Ofgem’s price cap is supposed to ensure that customers are being treated fairly and that they do not pay too much for their gas and electricity.
The price cap covers:
- The standing charge, which is a fixed daily amount customers have to pay for their energy regardless of how much energy they consume
- The price for each unit of electricity and gas customers use (measured in p/kWh)
Not all customers are protected by the price cap, however. If you sign a fixed energy tariff, you will be paying the same rates throughout the duration of your contract. That can protect you from the sudden increases in the prices of gas and electricity, but at the same time it gives you less flexibility.
Why did the price cap increase so much?
Ever since the price cap was introduced, Ofgem has been reviewing it every six months to make sure it is not harmful to either energy consumers or suppliers. Hence, the energy price cap is not fixed. On the contrary, it changes every once in a while. For example, last October there was an increase in the price cap, which led to households paying £139 a year more for their bills.
While you might have noticed some changes to the energy price cap in recent years, you might be wondering why it has increased so much now.
That is because the UK is dealing with an energy crisis so severe that almost 30 suppliers have gone out of business. Wholesale energy prices have been rising, which means it is becoming increasingly more expensive for suppliers to purchase the energy they then supply to customers.
In addition to that, the UK, and Europe as a whole, are struggling to meet the demand for energy as there are serious gas shortages around the continent. Then, there is also a risk that Russia will soon invade Ukraine and stop delivering gas to Europe.
There are so many challenges that the UK and Europe need to overcome at the moment that increasing the energy price cap was an absolute necessity.
What to do if you are struggling with paying the bills?
If you are struggling with paying your bills, do not worry because you are not the only one. Sadly, many households around the UK have been facing fuel poverty, which is a situation where they have very little money left after paying their energy bills.
Additionally, you might be able to use some of the options that the government introduced. These are:
- £150 discount on their council tax bill in April (available to 80% of all homes in England)
- £200 off energy bills in October (available to all domestic customers in the UK)
- up to £350 to help with costs of living (available to millions of households around the UK).
The government acknowledges that the increase in energy price cap can negatively affect households around the UK so they want to do something to help.
Moreover, suppliers know that the increase in the energy price cap is worrying and they are there to try to help you. Do not wait until it is too late. If you know that you will struggle with paying your next bill, let your supplier know. They will talk to you about your circumstances and will come up with a payment plan that can help you settle the payment.
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