Energy bills will increase by a staggering 82% in October, and are set to continue rising through 2023.
Regulator Ofgem’s latest price cap comes into force from 1 October, hiking prices for the average household to £3,549 a year, up from £1,971 now.
The price cap will now change every three months. It’s predicted to rise by a further 50% to £5,387 in January before increasing again in April to £6,616. However, the energy market is hugely volatile, and these forecasts are changing regularly.
The latest prediction hike follows further disruption to Russian gas flows to Europe, which led to another leap in wholesale energy costs.
The increases in energy bills are being made worse by the devastating situation in Ukraine, and the impact of government sanctions on Russian gas suppliers. However, the cost of wholesale gas was already soaring before the war broke out, leaving millions of households worried about how they’ll make ends meet in the months to come.
Many of us may be wondering whether we should switch to a fixed rate tariff to protect ourselves from future increases, if this is even an option. After all, while a fixed rate deal may appear poor value today as providers factor in future rising costs, it could be worth switching to for the security of knowing how much you’ll pay for a certain period.
If you’re considering moving to a different energy tariff, your first step should be to establish which tariff you’re currently on. You’ll be on a variable tariff, the cost of which is determined by the price cap, if your fixed energy tariff has ended and you haven’t switched to another deal, or if you’ve never switched your energy tariff, or if you were with a supplier that’s gone bust and you’ve been moved to another provider. This means that the majority of UK households are currently on the price cap.
The cap gives an estimate of the maximum amount per year that an average household using a ‘typical’ amount of energy will pay. However, it’s by no means a limit, as if you live in a large property, or use a lot of energy, you’ll pay more than this.
Default tariffs are in the vast majority of cases, currently the cheapest option. In the past, you’d shop around for another competitive fixed rate tariff to move onto, as these lock in the unit rates and standing charges of your gas and electricity for a certain period of time. However, fixes have rocketed in price as suppliers factor in the soaring cost of energy, with many suppliers quoting as much as £5,000 a year or more to fix.
There are now some fixes that are cheaper than the predicted October price cap, but they are usually for existing customers only. However, there are currently no open market fixes on the market that are worth switching to, which are the ones that anyone can move to, unless you’re willing to pay well over the predicted increase for price certainty. Bear in mind that fixes for existing customers can be pulled at any time.
If you factor in future price predictions, and greater energy use in the winter, you’ll pay on average around 147% more over the next year for your energy bills than you do now. So fix your energy prices if you can get a fix that’s no more than 145% above your current price-capped tariff.
It’s important to remember that these calculations are estimates, and no-one can be certain what will happen to energy prices with so many unknowns at present. Some current fixes may also come with hefty exit fees for leaving the deal early, which are important to bear in mind.
It’s worth keeping an eye on your current provider’s offers, and be prepared to switch immediately if you want the peace of mind a fixed rate tariff could provide, and you manage to find a decent deal.
If you’re currently on a fixed-rate tariff, you should stick on this until it ends, because you’re likely to be on the best possible deal. Even if you’re tempted to move to another deal because you’re anxious about missing out on one when prices are soaring, it’s unlikely to be worth losing your current deal, and you’re also likely to be charged a penalty to leave your deal early.
It’s an extremely tough time for households battling rising costs across the board, from petrol, to energy, food and other general utilities. As a first step, it’s worth contacting your energy provider if you’re struggling and slipping into the red. They may be able to help with a payment plan, or make other suggestions.
If you’ve explored all of your available options and are still struggling, your council may offer a local welfare scheme for families and individuals who are struggling to meet basic costs. The Household Support Fund is provided by the government to councils for this purpose. Contact your local council to see if you might be available for support.
It’s also well worth checking whether you might be able to reduce some of your other outgoings, so you can free up a bit of extra cash to help you cover rising energy costs.
It’s important to check whether you might be eligible for some financial support from the government. You should have received a £150 rebate on your council tax bill to help with energy costs in April, if your home is in Council tax band A-D.
The government has also announced a £400 energy grant to be paid to every household in the UK in October. The £400 payments replace the government’s earlier plans to provide a £200 rebate for every household in October. These rebates had to be paid back, whereas the £400 payments aren’t repayable.
Extra payments of £650 will also be provided to those receiving Universal Credit, Tax Credits and legacy benefits.
If you were born on or before 26 September 1955, check if you’re entitled to the Winter Fuel payment. This is a tax-free amount of between £100 and £300 to help pay your heating bills over winter, and the amount you receive depends on your age and anyone else in your household.
The government will also give an extra £300 to those receiving the Winter Fuel payment, with a further £150 payment to those receiving disability benefits.
Alternatively, you may be able to get money off under the Warm Home Discount Scheme, which is a one-off £140 discount on your electricity bill paid to your supplier between September and March.
If your home is poorly insulated, you may be able to make improvements through installing insulation.
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