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

Our previous post focused on the reasons behind skyrocketing energy prices in the UK. Now, we're diving into another pressing concern: just how much are energy bills expected to rise? In this article, we'll explore the details of these price hikes and what they might mean for you.

 

How Much Are Energy Bills Increasing?

There isn't a single, clear-cut answer to this question. Estimates are generally based on what's considered a "typical household" in the UK. Before the government's recent announcement, projections suggested that annual energy bills could jump from £1,971 to £3,549. To mitigate these rising costs, the government introduced an energy price guarantee, which means that the average household's energy bill will now rise to approximately £2,500 per year.

 

What Is the Energy Price Guarantee?

The energy price guarantee is designed to "cap" energy bills across the UK, taking effect on October 1. It replaces the energy price cap previously set by Ofgem, the Office of Gas and Electricity Markets. Here's a summary of the key points about the energy price guarantee:

• Originally, the energy price cap was set to increase by 80% on October 1, affecting around 24 million people in England, Scotland, and Wales.
• The guarantee is currently scheduled to last for two years, though it will now end in April 2023.
• The guarantee applies to all households in England, Scotland, and Wales.
• It's important to note that the guarantee doesn't set a strict limit on what you'll pay. Instead, the figure is based on an "average household," so your actual bill will depend on your energy consumption.

 

How Much Have Energy Bills Increased This Year?

In April 2022, the price cap rose by 54%, and it was initially expected to increase by another 80% on October 1. Thanks to the energy price guarantee, the final increase will be closer to 27% compared to the summer 2022 cap. While this is lower than the original Q4 2022 price cap and significantly less than earlier forecasts for 2023, it still represents a substantial hike in energy costs.

 

Will the Energy Price Guarantee Affect Me?

As mentioned earlier, the amount you pay for energy depends on your individual energy usage. While the term "price cap" might suggest that your bill will be capped at £2,500 regardless of consumption, this isn't necessarily true. The £2,500 figure is based on a typical household, which doesn't account for various factors that could influence your bill. These include:

• The number of people living in your home.
• The type of property you live in.
• Your household's energy usage, particularly heating and power consumption.

For instance, someone living in a purpose-built flat might face a yearly bill of around £1,750, while someone in a detached house could see their bill reach £3,300. Additionally, the energy price guarantee only applies to certain tariffs. Specifically, it applies to:

• Default energy tariffs, whether you pay by direct debit, standard credit, or prepayment meter.

It does not apply to:

• Fixed-term energy tariffs.
• Standard variable green energy tariffs that Ofgem has exempted from the cap.

If you've recently been moved to a new tariff due to your supplier ceasing operations, you're likely on a price-capped tariff. However, it's always wise to confirm your current tariff with your provider. Since the introduction of the guarantee, the government has stated that many households on fixed deals will receive discounts. Nevertheless, households 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 energy price cap, it establishes the maximum rate suppliers can charge domestic households for each 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 these rates may vary depending on your payment method, meter type, and location. To get a better understanding of how the guarantee will impact you personally, it's best to contact your supplier directly.

Suppliers cannot charge customers more than the cap set by Ofgem, as Ofgem monitors compliance with the cap. However, knowing these figures can provide some reassurance.

 

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% 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 starting in October.
• Households that don't use mains gas and electricity—such as those relying on heating oil—will receive an additional £100 discount.
• A one-time payment of £650 will be provided to around 8 million households receiving means-tested benefits.
• Households claiming specific disability benefits will receive a one-time £150 cost-of-living payment.
• A one-time payment of £300 will go to over 8 million pensioner households.

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–8 pm). Initially, households would earn 52p per kilowatt-hour saved during these periods, but this has since been raised to £3 per kilowatt-hour. However, this program will only be available to homes equipped with smart meters. If implemented by energy providers, this initiative could help offset some of the increased energy bill costs, offering further relief to UK residents facing high energy expenses.

 

Are There Further Support Options If I Can't Pay My Bill?

Beyond the above initiatives, the government offers several measures to assist affected households:

The Warm Home Discount Scheme – reopening 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 details, contact your local council.

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

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

Additional support, 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 Expected to Rise in 2023?

We hate to break the news, but the energy price cap is likely to increase again in 2023. The government's energy price guarantee remains in effect until April 2023 and will be subject to quarterly reviews thereafter. Previously, Ofgem adjusted rates every six months. Due to market volatility, they have now switched to quarterly reviews. Below is a table showing the price cap periods and announcement dates for 2023.

Price Cap Period	Announcement Date
January 1 – March 31	November 24, 2022
April 1 – June 30	February 27, 2023
July 1 – September 30	May 26, 2023
October 1 – December 31	August 25, 2023

 

Energy-Saving Tips

We hope this article has provided you with valuable insights and resources to help you navigate these challenging times. To conclude, 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 dark to retain heat, and check your windows and doors for drafts.
• Switch to energy-efficient products wherever possible, such as LED light bulbs.
• Unplug appliances when not in use and avoid keeping them on standby.
• Only run washing machines, dryers, and dishwashers on full loads.

If you're curious about why energy bills are rising, check out our article here.

Installing solar panels can help reduce reliance on the energy price cap by generating your own electricity. You may even earn money for any excess energy produced through Feed-In Tariffs. Contact us today to learn more about how solar panels can benefit you.