Your guide to the Ofgem energy price cap: Will you be affected?
This year we have unfortunately seen a hike in energy prices due to wholesale market volatility. Ofgem announced in February an increase of the new price cap by £693 a year on energy bills, a rise of 54%. This is for the period of 1 April 2022 to October 2022. Some of you may be a bit concerned about what is happening, and how it may affect you. This is why our Energy Specialists have put together this simple guide to help ease the stress and direct you to places where you can find support.
What is the Ofgem energy price cap?
In 2019 Ofgem (1) established a price cap to regulate energy prices on default and variable tariffs. The idea was to make sure you pay a fairer price for your energy, and links to how much suppliers can charge you per unit of gas or electricity, based on the underlying costs to supply you energy. From 1 October 2022 the cap will be reviewed every three months (previously six months).
It is what a utility company can charge an average customer in the UK per year for the amount of electricity and gas they use.On Thursday 3 February, Ofgem announced (2) that energy bills for the average customer on a default tariff is set to rise from £1,277 to £1,971 a year.
Prepayment customers will see an increase of £708 to £2,017. The cost of buying gas and electricity in the global markets for suppliers like us has increased significantly since this time last year. This strain has unfortunately resulted in the collapse of 30 energy suppliers (3) who between them were responsible for more than two million homes.
Why are energy prices going up?
The cost of energy prices are higher due to many different factors.
39% of The United Kingdom power still comes from burning gas.(4)
Last winter was particularly cold in Europe, this drove up demand and used up stored gas supplies.
There was also increased demand in China, as well as other parts of Asia, while Russian pipeline gas supplies were lower than expected.
There were significant gas and nuclear outages in the UK, and too few UK wind turbines to generate power. Low wind levels have led to more gas, and even coal, being used for power production, pushing already rising wholesale gas and electricity costs to record levels.
Is the Ofgem energy price cap going to affect me?
The energy price cap will only apply to you if you're on our variable tariff, which means you could end up paying more for your energy. You can check which tariff you're on in your online account. However this is not applicable to you if you're on our fixed or fixed rate tariffs, but will affect you when your contract ends.
The government has announced several support measures to help households with rising energy bills. These include:
The government has announced a £400 Energy Bill Support Scheme without the need to pay it back. This is from the £200 loan scheme for energy bills for all homes in the autumn - increasing it to £400 without the need to pay it back.
A £650 payment will be made to more than eight million low-income households who receive Universal Credit, tax credits, pension credit and other means-tested benefits. The first payment of £326 will start appearing in people's bank accounts from 14 July. To be eligible for the first instalment, people must have started a successful benefits claim by 25 May.
A £150 non-repayable Council Tax Rebate payment for all households that are liable for Council Tax in Bands A-D in England.
£144 million of discretionary funding for Local Authorities to support households who need support but are not eligible for the Council Tax Rebate. Further details to be announced.
The government is continuing with plans to expand eligibility for the Warm Home Discount and increase the rebate value to £150 each year (from £140). More detail will be published shortly in the government response to the consultation on this.
If you need extra help with managing your energy account, we can add you to our Priority Services Register. If you or someone in your household is elderly, disabled or chronically sick, or if you have a speech, visual or hearing impairment we offer a range of services that will help.
The Affordable Warmth Scheme.
Affordable Warmth is a government-led eco scheme that helps people heat their homes in an energy-efficient way. It allows people to spend less on their monthly bills and support being friendlier to the environment too.
The Green Homes Grant is a £2 billion scheme, launched by the government to help homeowners pay for energy saving improvements for their homes. The grant helps by installing measures such as wall insulation, solar panels and air source heat pumps.This is to improve the warmth of homes, cut energy bills and help the UK to be zero-carbon by 2050.
Homes for Living is a scheme designed to support your mobility, wellbeing and independence, offering free and attractive home aids and equipment designed to give you more freedom in your home. We've secured Government funding and we're working in partnership with Invisible Creations® and Newcastle University.
There are also external debt advice resources you can get through Citizens Advice and StepChange. If you are also worried about how money can have an impact on your mental health. We advise you to talk to our charity partner Mind.
Contact our Energy Specialists if you're having difficulty.
Our Energy Specialists are here to help if you're concerned about the impact of the price cap rise on your energy bills. If you're struggling to pay, please visit our help page to find out more about how we can support you. You can reach out to our Energy Specialists for personal advice on Facebook and Twitter. You can also find more information over on our Price Cap Information page.
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