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Information about Energy Price Rises<\/p>\n
The price cap increase has recently dominated all the UK\u2019s media. We brought together experts working on different National Energy Foundation\u2019s projects in order to clear up any questions you might have about the energy crisis, as well as advise residents as to what actions they should or should not take.<\/p>\n
What is happening and why?<\/strong><\/p>\n Let\u2019s start with the basics. Ofgem, which is the energy market regulator, first set the price cap on 1 January 2019, with an aim of limiting the maximum amount that energy suppliers can charge for every unit of gas, electricity, and the standing charge. Nevertheless, following the latest announcement, everyone will end up paying more. Why?<\/p>\n According to Ofgem, there are various reasons why we\u2019re experiencing an increased demand for gas. The global economic recovery and the increased demand from Asia, as well as the very cold winter in Europe, with millions of people needing to heat their homes, are just some of the reasons why there\u2019s less gas available on the market (Ofgem, 2021). As increased demand causes greater prices, this is also linked to the increase in prices for carbon allowances, which are a financial tool that aims to lower the amount of greenhouse gas emissions in Europe.<\/p>\n This all influences the fact that gas is now much more expensive than a year or 2 years ago, impacting the wholesale electricity prices. UK\u2019s residents will in turn need to pay much more for their energy bills, with many already struggling due to inflation and the rising cost of living. But what do we know so far about how the prices will change?<\/p>\n The most recent update<\/strong><\/p>\n Energy regulator Ofgem has announced that the energy price cap on gas and electricity will rise by 54% from 1 April 2022. On typical use, it\u2019s set to increase from \u00a31,277\/year for a household paying by direct debit to \u00a31,971 \u2013 adding \u00a3693\/year to the average bill.\u00a0If you are on a pre-payment meter the cap has been increased to \u00a32,017\/year for a typical household.<\/p>\n For clarity, this doesn\u2019t mean that is what everyone will pay. It\u2019s the unit rates that are capped, so if you use more, you\u2019ll pay more. It only applies to providers\u2019 standard and default tariffs, so if you\u2019re on a fixed-term energy deal, the cap doesn\u2019t apply. If you\u2019ve not switched in the last year or so, it\u2019s likely you\u2019re on default or standard variable tariff and subject to the price cap.<\/p>\n In most cases, if your supplier has gone bust, your existing tariff with that supplier will end, and Ofgem will pick a new supplier to take over. Your new tariff with the new supplier will be protected by the price cap.<\/p>\n What should do you?<\/strong><\/p>\n You can have a look at a recent bill or contact your supplier to check what tariff you are on. Then you can use the Uswitch quick check service to find out if you should stick with your current supplier and tariff \u2013\u00a0https:\/\/www.uswitch.com\/gas-electricity\/guides\/how-to-switch-gas-and-electricity\/<\/a><\/p>\n If you\u2019re offered a fix that\u2019s no more than\u00a044% more expensive<\/em>\u00a0than your current price-capped tariff, it\u2019s worth considering\u00a0\u2013 especially if you value price certainty. Once the new price cap comes into force on 1st April, we\u2019ll be in a better position to see if fixed tariffs are higher than the new price cap, in line, or cheaper. Fixing right now will give you certainty on the unit price for the length of your deal. Not fixing will give you flexibility if better deals become available. Click here to find out more \u2013\u00a0https:\/\/www.moneysavingexpert.com\/utilities\/cheap-gas-and-electricity\/<\/a><\/p>\n Whatever you decide, make sure you are giving\u00a0regular meter readings<\/em>\u00a0to your supplier as otherwise your bill will be estimated, and you could end up being overcharged. You can ask your supplier to fit a smart meter which will automatically send them readings. If you are having difficulty reading your meter, please let us know and we may be able to help.<\/p>\n Who will be the most affected?<\/strong><\/p>\n All the above is useful to those of us with stable jobs and incomes, but we can\u2019t forget about those who have been struggling with their energy bills even before the price cap increase. It\u2019s estimated that the increase in the energy price cap will put another 1.5 million households into fuel poverty, adding up to the existing 4 million households that were in fuel poverty as of October 2021 (National Energy Action, 2022). This leaves more families having to choose between food and heating, with catastrophic consequences for both people\u2019s health and the UK\u2019s health services.<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n Sources:<\/strong><\/p>\n MoneySavingExpert, 2022 \u2013 https:\/\/www.moneysavingexpert.com\/utilities\/cheap-gas-and-electricity\/<\/a><\/p>\n National Energy Action, 2022 \u2013 National Energy Action (NEA) | Energy Crisis<\/a><\/p>\n