How much will my energy bills cost is a question millions of people are worrying about in the wake of the energy crisis and the soaring price of gas.
Gas prices are now around four times higher than they were in 2020. The hike in prices has been caused by various global factors, including increased demand after lockdown, and export issues from Russia, which will no doubt worsen since the start of the war with Ukraine. As a result, the energy price cap has been increased and energy prices are set to skyrocket. It’s estimated that 22 million households will be affected.
The cap -which came into force on 1 April 2022 – is set by energy regulator Ofgem. It is intended to limit how much energy suppliers can charge their customers per kWh of gas and electricity. On 3 February 2022, the new cap of £1,971 was announced, an increase of almost £700 for those on a standard default tariff paying by direct debit. For prepayment customers, the cap increased to £2,017. Ofgem reviews the cap twice a year, with changes coming into effect in April and October. The cap takes into account the underlying market costs of energy and so could go up or down.
Jonathan Brearley, chief executive of Ofgem, said: “We know this rise will be extremely worrying for many people, especially those who are struggling to make ends meet. Ofgem is working to stabilise the market and over the longer term to diversify our sources of energy which will help protect customers from similar price shocks in the future.”
The cap won’t apply to you if you are on a fixed tariff, where you pay the same amount for your energy each month. But when your fixed rate ends (usually after 12-18 months) you are likely to be moved to a standard variable tariff. This means that the price you pay can go up or down.
The cap protects those on a standard variable tariff by limiting how much your supplier can charge. You should bear in mind, however, that if your energy consumption is extensive, you could end up paying more than the cap.
If you’re not sure what tariff you are on, you can check your latest energy bill or speak to your supplier.
How much will my energy bills cost in 2022?
For more information on how much your energy bills could increase following the new price cap, use our handy calculator.
You can also use our calculator to see how a second price rise in October could affect your bills. Analysts at Cornwall Insight are predicting the October increase could be in the region of 32%.
Simply input how much you typically pay per month on your current tariff. Our tool will estimate how your bills could be affected for the rest of the year.
Normally, the best way to tackle rising energy prices is to switch to a cheaper deal. But amid the energy crisis, many suppliers have raised the costs of their tariffs. This means there aren’t really any cheap deals to be found.
Lower-income households are also most likely to be hit the hardest by the increase.
Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, says: “People on lower incomes are forced to spend a larger proportion of their income on essentials, so price rises have an enormous impact. In the year to April 2020, the 10% of households on the lowest incomes used 7% of their weekly spend on energy. For the richest 10%, it was just 2% of their spending. It means that those on lower incomes have an enormous battle to cut costs at times like this.”
The government also announced measures to help, including a council tax rebate and £200 in energy bill assistance. This £200 will need to be repaid over a five-year period from 2023.
How can I reduce how much my energy bills will cost?
There are simple and inexpensive ways to scale back how much energy you use. You could even consider some options which may involve a short-term cost now with the promise of long-term savings in the future.
Energy-saving measures include:
- Turning the thermostat down by a single degree
- Washing clothes at a cooler temperature
- Turning off any appliances left on stand-by mode
- Swapping older incandescent light bulbs to energy-saving alternatives
- Draught proofing
- Choosing the most energy-efficient models you can when purchasing new appliances.
You may also be eligible for a grant from the government for improvements to make your home more energy-efficient.
What is the average UK energy bill?
Your energy bill will depend on multiple factors. These include your location, the tariff you’re on, how many people there are in your household and how energy efficient your home is. But understanding the average gas and electricity bills in the UK can be a useful benchmark.
Average electric bill
According to Ofgem, the average household of 2.4 people uses 2,900 kWh of electricity each year, at an average cost of 20p/kWh.
This equates to an average electric bill of £580 per year or £48.33 per month.
Average gas bill
When it comes to the average gas bill, the average UK household uses 12,000kWh of gas every year at a cost of 7p/kWh.
This equates to an average of £840 per year or £70 per month.
Why have energy prices gone up?
There are numerous reasons why energy prices have skyrocketed. At the heart is the UK’s increased reliance on imported energy and a lack of energy storage facilities. There has been a reduction in the gas supply from Russia which has meant extra pressure from the whole of Europe on alternative options. This increase in demand and the limited supply is a key factor pushing energy prices up. We’re also not yet in a position to rely on renewable energy as an alternative option.
Moving away from fossil fuels to more renewable sources of energy is high on the agenda though. The UK has wound down its tapping of reserves in the North Sea for gas on-demand, avoiding the need for expensive storage facilities. But, renewable energy is not currently generated in the quantities needed to remove reliance on fossil fuels.
Energy bills are not the only nationwide thing increasing in 2022, with Royal Mail announcing that the cost of First and Second Class stamps will go up in April too.
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