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

Our previous article tackled the issue of skyrocketing energy prices in the UK. Now, let's address another crucial question: just how much are energy bills climbing? This post dives deep into the details surrounding energy price hikes and how they could impact you. 

 

How Much Are Energy Bills Rising?

There isn't a single, clear-cut answer to how much energy bills are increasing. Instead, estimates are made based on the concept of the 'typical household' in the UK. Before the government's recent announcement, projections suggested that typical household bills would jump from £1,971 to £3,549 annually. 

To mitigate the soaring energy costs, the government implemented an energy price guarantee, meaning that a typical household's energy bill will now rise from £1,971 to £2,500. 

 

What Is the Energy Price Guarantee?

The government introduced the energy price guarantee to effectively 'cap' energy bills across the UK, coming into effect on October 1. This guarantee replaces the energy price cap previously set and reviewed by Ofgem—the Office of Gas and Electricity Markets. Below is the key information you need to know about the energy price guarantee:

• The energy price cap was expected to increase by 80% starting October 1 for 24 million people in England, Scotland, and Wales.
• The guarantee was initially planned 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 doesn’t act as a strict cap; it’s calculated based on an ‘average household.’ Your actual bill will still depend on your energy consumption.

 

How Much Have Energy Bills Increased This Year?

In April 2022, the price cap rose by 54% and was scheduled to increase further by 80% on October 1. Thanks to the energy price guarantee, prices will rise by 27% from the summer 2022 cap. While this might sound daunting, there’s some good news. According to the government, this figure is lower than the original Q4 2022 price cap and significantly less than earlier forecasts for 2023.

 

Does the Energy Price Guarantee Affect Me?

As noted above, the amount you pay for energy depends on how much energy you consume. So, the term 'price cap' can be somewhat misleading, as you might assume 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 the many variables that could affect your bill. Factors such as the number of people in your home, the type of property you live in, and your household’s energy consumption can all play a role:

• Living in a purpose-built flat could mean your annual bill is around £1,750, while a detached house might see bills closer to £3,300.

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

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

However, the cap won’t apply if:

• You’re on a fixed-term energy tariff.
• You've chosen 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. Still, it’s always wise to contact your supplier to confirm what tariff you’re on. 

Following the introduction of the guarantee, the government stated that many households on fixed deals would receive discounts. However, households on expensive fixed tariffs could 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 energy price cap, it sets the maximum amount suppliers can charge domestic households per unit of energy used. These units are measured in kilowatt-hours (kWh) and listed on your bill. 

Starting October 1, 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 will vary depending on your payment method, meter type, and region. It’s best to contact your supplier for personalized information to get a clearer understanding of how the guarantee will affect you. 

Suppliers can’t charge customers more than the cap set by Ofgem, as Ofgem monitors them to ensure compliance. However, these figures are worth keeping in mind for your peace of mind.

 

A Typical Energy Bill Breakdown

The October to December 2022 price cap includes the following:

• 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 has introduced 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 in October.
• Households that don’t use mains gas or electricity—such as those using heating oil—will receive an additional £100 discount.
• A one-time payment of £650 will be provided to around 8 million households on means-tested benefits.
• For households claiming specific disability benefits, a one-time £150 cost-of-living payment is available.
• A one-time payment of £300 will be given to over 8 million pensioner households.

Households may be eligible for multiple payments under this scheme.

The National Grid has announced plans to collaborate with Ofgem to launch a program that rewards households for reducing electricity usage during peak hours (5 PM–8 PM). Initially, households would earn 52p per kilowatt-hour saved during these periods, but this has since been increased to £3 per kilowatt-hour. However, this scheme will only be available to homes equipped with smart meters. If energy providers adopt this plan, individuals can expect to offset some of their increased energy costs, providing further support for UK residents amid high energy bills.

 

Is Further Support Available If I Can't Pay My Bill?

In addition to the above schemes, the government offers several measures to assist affected households:

The Warm Home Discount Scheme – which reopens in November 2022 – will offer eligible households £140 off 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.

Further assistance, such as grants and services, may also be available from your energy provider or charitable organizations. If you're struggling to pay your energy bills, visit the Ofgem website for more information. 

 

How Much Are Energy Bills Rising in 2023?

While we wish we had better news, the energy price cap is likely to increase in 2023. The government's energy price guarantee remains in effect until April 2023 and is subject to change quarterly. 

Previously, Ofgem reviewed rates every six months. Due to market volatility, they’ve recently switched to reviewing rates every three months. The table below shows the price cap period and announcement dates for 2023:

 

Energy-Saving Tips

We hope this article has provided you with plenty of practical advice and resources to help navigate these challenging times. To wrap things up, here are five energy-saving tips to help keep your bills as low as possible:

• Use a timer on your central heating to avoid heating or hot water when you're not home.
• Close your curtains after sunset to prevent heat from escaping, and check your windows and doors for drafts.
• Switch to energy-efficient products whenever possible, like energy-saving light bulbs.
• Turn off appliances and chargers when not in use.
• Only run full loads in your washing machine, tumble dryer, or dishwasher.

If you'd like to learn more about why energy bills are increasing, read our article here.

Installing solar panels can help combat rising energy costs by generating your own electricity. You can even earn money for any surplus energy produced by your solar system through Feed-In Tariffs. Contact us today to find out more.