How Much Are Energy Bills Going Up? Everything You Need to Know

Recently, we explored the reasons behind the rapid rise in energy prices in the UK. Today, we're diving into another crucial topic: just how much are energy bills expected to increase? This article will cover everything you need to know about the ongoing energy price hikes and how they might impact you.

 

How Much Are Energy Bills Rising?

Unfortunately, there isn't a single definitive number for how much energy bills will rise. Instead, predictions are based on the concept of the 'typical household' in the UK. Before the government's recent announcement, it was estimated that the average household bill would jump from £1,971 to £3,549 annually. However, thanks to the introduction of the energy price guarantee, the anticipated increase has been reduced to £2,500 per year for a typical household.

 

What Is the Energy Price Guarantee?

The government introduced the energy price guarantee to essentially cap energy bills across the UK, effective October 1st. This measure replaces the previous energy price cap, which was regularly reviewed and set by Ofgem—the Office of Gas and Electricity Markets. Here are the key points to remember about the energy price guarantee:

• The energy price cap was initially expected to rise by 80% starting October 1st for 24 million people in England, Scotland, and Wales.
• The guarantee is set to last for two years but will now conclude in April 2023.
• This guarantee applies to all households in England, Scotland, and Wales.
• The guarantee is not an absolute cap on your energy bill. It’s calculated based on an 'average household.' Your actual bill will depend on your individual energy consumption.

 

How Much Have Energy Bills Increased This Year?

In April 2022, the price cap increased by 54%, and it was projected to rise by another 80% on October 1st. Thanks to the energy price guarantee, the price increase will now be approximately 27% compared to the summer 2022 cap. While this is still concerning, it's lower than the originally forecasted Q4 2022 cap and significantly better than earlier projections for 2023.

 

Will the Energy Price Guarantee Affect Me?

As mentioned earlier, the amount you'll pay for energy depends on how much energy your household consumes. The term 'price cap' can be misleading since it doesn't mean your bill will be capped at £2,500 regardless of your energy usage. The £2,500 figure is based on a typical household, which doesn't account for various factors that could influence your bill.

Factors that may affect your energy bill include:

• The number of people living in your home.
• The type of property you live in.
• Your household's energy consumption—how much heating and electricity you use.

For instance, if you live in a purpose-built flat, your annual bill might be around £1,750, while someone living in a detached house could face a bill closer to £3,300.

Additionally, the energy price guarantee applies depending on your tariff. The cap applies if:

• You're on a default energy tariff, regardless of whether you pay via direct debit, standard credit, or a prepayment meter.

However, the cap won't apply if:

• You're on a fixed-term energy tariff.
• You've opted for a standard variable green energy tariff that Ofgem has exempted from the cap.

If you've recently been moved to a new tariff because your supplier went out of business, you're likely on a price-capped tariff. But if you're unsure about your current tariff, reach out to your provider.

Following the introduction of the guarantee, the government stated that many households on fixed deals would receive a discount. However, those on expensive fixed tariffs might still end up paying more than those on standard variable tariffs.

 

How Does the Energy Price Guarantee Work?

As the energy price guarantee replaces the previous energy price cap, it sets the maximum rate suppliers can charge domestic households for each unit of energy used. These units are measured in kilowatt-hours (kWh) on your bill.

Starting October 1st, dual-fuel customers on a standard variable tariff will be charged:

• 34p per kWh of electricity
• 10.3p per kWh of gas

Please note that average rates may vary depending on your payment method, meter type, and region. To get a clearer understanding of how the guarantee affects you, contact your supplier for personalized information.

Suppliers cannot charge customers more than the capped rates set by Ofgem. Ofgem monitors suppliers to ensure compliance with the cap. These figures provide some reassurance, but it's always wise to consult your provider for tailored advice.

 

A Typical Energy Bill Breakdown

The October to December 2022 price cap includes the following components:

• 70% wholesale energy cost
• 10% network costs
• 5% operating costs
• 4% policy costs
• 5% VAT
• 2% assumed suppliers’ profit margin
• 4% miscellaneous costs

 

Energy Bills Support Scheme to Help With Rising Costs

In response to rapidly rising energy costs, the government launched the Energy Bills Support Scheme. On May 26, 2022, the Chancellor announced the following measures:

• Every household in the UK will receive a £400 energy bill discount starting in October.
• Households that don’t use mains gas and electricity—for example, those relying on heating oil—will receive an additional £100 discount.
• Around 8 million households on means-tested benefits will receive a one-off payment of £650.
• Households receiving specific disability benefits will get a one-off £150 cost-of-living payment.
• Over 8 million pensioner households will receive a one-off payment of £300.

Some households may qualify for multiple payments under this scheme.

The National Grid has announced plans to collaborate with Ofgem to introduce a program that rewards households for reducing electricity usage during peak hours (5 pm to 8 pm). Initially, households were set to earn 52p per kilowatt-hour saved, but this has been increased to £3 per kilowatt-hour. However, this program will only be available to homes with smart meters installed. If implemented by energy providers, this initiative could help offset some of the increased energy bill costs, providing further relief to UK residents.

 

What Happens If I Can’t Pay My Bill?

In addition to the above initiatives, the government has several measures in place to support affected households:

The Warm Home Discount Scheme – which reopens in November 2022 – will offer eligible households a £140 discount on their electricity bill.

The Household Support Fund – the government has committed an additional £500 million in local support through this fund. For more information, contact your local council.

The Winter Fuel Payment – this is a fuel payment for those born on or before September 25, 1956.

The Cold Weather Payment – this is a payment made for every seven days of very cold weather from November to March.

Additional support, including grants and services, may also be available from your energy supplier or charitable organizations. If you're struggling to pay your energy bills, visit the Ofgem website for more information.

 

How Much Are Energy Bills Going Up in 2023?

We regret to say that energy prices are likely to continue rising in 2023. The government's energy price guarantee remains in place until April 2023, after which it will be subject to quarterly reviews.

Previously, Ofgem reviewed rates every six months. Due to market volatility, they've shifted to reviewing rates every three months. Below is a table showing the price cap periods and announcement dates for 2023:

 

Energy-Saving Tips

We hope this article has provided you with valuable insights and resources to help navigate these challenging times. To conclude, here are five energy-saving tips to help you keep your bills as low as possible:

• Use a timer on your central heating to avoid running it when you're not home. Avoid using heating or hot water unnecessarily.
• Close your curtains at night to retain heat, and check your windows and doors for drafts.
• Switch to energy-efficient products where possible, like LED light bulbs.
• Turn off appliances and chargers when not in use to avoid unnecessary energy consumption.
• Only run full loads in your washing machine, tumble dryer, or dishwasher to maximize efficiency.

If you want to understand why energy bills are rising, check out our article here.

Installing solar panels can help mitigate the impact of rising energy prices by generating your own electricity. You can even earn money by selling excess energy back to the grid through feed-in tariffs. Contact us today to learn more about how solar panels can benefit you.