By now you’ll be aware that energy prices have soared as global wholesale gas prices have gone up by a lot.
Now, the energy regulator has announced its price cap – the maximum amount suppliers can charge households for every unit of energy.
Ofgem, the energy regulator, has announced that the price cap is rising by 54% – a devastating blow to millions of households in the UK who will have to pay hundreds of more pounds from April 1.
This means that, as per the cap, the average energy bill will go up by £693 annually.
Such a huge spike is sure to lead to questions, including how much your new bills could be, and whether there’s anything you can do against it. Here’s what you need to know.
Why are energy prices rising?
The pandemic has had a large role to play in this. As mentioned, the price of gas has gone up all over the world. This is because, during the pandemic, global energy consumption had decreased dramatically as businesses shut down and traffic virtually disappeared. But since the bounce back and as things began opening up, the demand for energy has soared exponentially.
This, coupled with a cold winter – stored gas depleted quickly – and windless summer – making it difficult to generate wind energy – meant a scarcity of resources.
Increased demand from China as well – which saw a sticky hot summer, amping up the need for air conditioners – also affected the situation.
While other countries are also experiencing similar problems, the UK is hard hit as it is one of the biggest users of natural gas – 85% of British homes have gas central heating.
How much will you be paying for energy?
The Ofgem announcement, which revealed that energy prices are to be capped at 54%, is higher than expected. But the unprecedented rise in gas prices has caused the cap to skyrocket.
The previous cap, bought out in August 2021, was set at a 12% rise, meaning an increase of £139 from the previous review. But a 54% hike means customers who were on a fixed tariff of £1,277, will now need to fork out £1,971.
This is devastating for millions, many of who, if not already, will be living in fuel poverty.
Will you get government support?
Chancellor Rishi Sunak is set to make an announcement offering a plan to ease the cost of living to the hardest hit.
Households in bands A-C may be offered council tax rebates, with poorer households getting some more money back. He is also set to unveil plans to offer a £200 discount on bills. So instead of £1,971, you may need to pay £1,771.
The government is also poised to announce an extension of the Warm Homes discount, meaning you could get £140 off your electricity bill. This was only available during certain months, dependent on income and the firm you’re with, but its eligibility could now be extended.
The money is not paid to you – it’s a discount applied to your electricity bill.
What can you do if you’re struggling?
For many, this news (and previous bill increases) has meant making the difficult choice between heating and eating.
If you’re struggling to keep up with bills, the Citizens Advice Bureau advises you to contact your supplier to discuss ways to pay what you owe them. Your supplier has to help you come to a solution. You should try to negotiate a deal that works for both of you.
“There are a number of energy companies who offer grants and schemes that are open to anyone – you don’t have to be a customer,” the website says.
“You might be able to get a grant from a charitable trust to help pay off your debts. Let’s Talk has more information on available grants and how to apply.
“If you’re disabled, elderly or you get benefits, check whether you can get other help paying your energy bills.
You can contact Citizen’s Advice or the charity National Energy Action for further advice. Money Saving expert Martin Lewis has said he is working on a webchat function and asking the government to help, in order to provide more advice before April 1.