Price Cap Rise
What is happening?
The Energy price cap was introduced in Jan 2019 by Ofgem, the energy regulator. It was intended to cap the price that energy companies could charge for their standard or default energy tariffs which had usually been their most expensive tariffs. It did this by setting a maximum cap that suppliers could charge per unit of gas or electricity.
Today Ofgem announced that from April 1st this cap would rise by 54%.
Does this apply to me and what does it mean?
This will only affect you if you are on the standard or default tariff, not if you are on a fixed deal so it’s worth checking that with your energy supplier.
Although each household’s situation is different currently the average home pays £1,277 annually for energy using the current cap. Remember this is an average and some will pay more and some less, depending on what they use, it is the unit price not the total price that is capped.
Today Ofgem announced this cap would increase by 54%. An average family home currently pays £1,277 for energy for the year, this will now rise to a new average of £1,971, which is an increase of £693 or almost £60 a month.
Why is this happening?
The wholesale gas price has been rising steadily and is now the highest it has been in years. Although this increase is impacting a number of countries, the UK is particularly exposed as we are such a large consumer of imported natural gas. 85% of us use it to heat our homes and it is used to generate a third of our electricity. These big increases haven’t yet been passed onto customers because of the price cap which is why we saw large numbers of energy firms lose money and go bust.
What can I do, and what help can I get?
Ordinarily faced with high prices people have been encouraged to shop around and switch suppliers. Consumer champions like Martin Lewis have discouraged this as the best rates now are often what you already have. So, it looks like for now at least we are stuck with these prices. This will be difficult for many and it is expected that the current households classified as in fuel poverty will rise from 4 million to as much as 6 million.
Energy Supplier – It’s a good idea to speak to your supplier if you are having problems, they must agree a payment plan that you can afford by making a payment break or giving you more time to pay.
Citizens Advice – You can contact citizens advice on 0808 278 7901 or email them at [email protected]. They can advise you on your rights and what government schemes that you may be eligible for such as:
- The Warm Home Discount is £140 off your electricity bills if you get the Guarantee Credit element of Pension Credit. You might also qualify if you have a low income.
- Cold Weather Payment is £25 for each seven days between November and April that it’s below 0°C. You can find out more from the government website.
- The Winter Fuel Payment is £200 if you’re over 66 or £300 if you’re over 80. You should get it automatically if you get the State Pension. Find out more through the government website.
In addition Ofcom, the energy regulator are offering advice through their website
New additional Support
The Chancellor announced on the 3rd of February there would be additional funding available to support households with these increasing energy bills. Although this is very new and more details are needed broadly this support includes;
- A £200 rebate loan in October that all households will receive. This will be paid back by households at £40 a year over 5 years.
- Households in council tax bands A to D will receive a £150 council tax rebate in April when the new price cap comes into force. You check what band you are in through the government website.
- A £144 million discretionary fund has been given to local councils aimed at those with a low income but don't qualify for the £150 Council tax rebate.
Using less energy
You could try to simply use less energy and the Energy Saving Trust has some good tips on everyday things you can do to save money.
Making your home more energy efficient.
However, for many you might need to think of a longer-term solution. The UK has some of the worst houses when it comes to energy efficiency in Europe which compounds the problem of these price rises which unfortunately are likely to continue for the foreseeable future.
Top 5 quick and simple things to do save energy
- Insulate the loft – check if your loft insulation is the recommended 270mm for wool insulation.
- Prevent drafts – Filling gaps in windows, doors, letterboxes and chimneys can be a quick and easy way to prevent heat loss, although be careful not to restrict controlled ventilation to prevent damp.
- Insulate hot water pipes and tanks – Either through simple foam tubes around exposed pipes or a jacket for your water tank.
- Reflective radiator panels – These are inserted behind radiators and direct heat back into the room
- Swap to energy efficient bulbs.
Investing in your home’s energy efficiency
Long-term you may think about investing in your homes energy efficiency and there are severaloptions available here, from new windows to more efficient heating systems. There are government grants and schemes out there to encourage people to improve their homes to meet our long-term carbon energy targets.
To help people navigate what can be a complicated journey PeCAN offers the ‘Whole House Retrofit Plan’. This is an independent review of you, your home and budget to help you understand what changes to your home are right for you and what grants might be available.