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What is the energy price cap and how high will bills go? What is the energy price cap and how high will bills go?
(17 days later)
This winter's increase in energy bills will be even sharper than predicted, according to the head of the regulator Ofgem. Another sharp rise in energy bills is expected in October
The lower estimate was used by ministers when deciding how much financial support to offer households. It has led to fears about how people will cope with soaring costs.
How high are bills going to go?How high are bills going to go?
In May, Ofgem chief executive Jonathan Brearley said a typical household would pay £2,800 a year - an increase of £800 - from October. The energy price cap - the maximum amount suppliers can charge customers in England, Scotland and Wales - will go up in October.
October is when the energy price cap - the maximum price set by Ofgem which suppliers can charge customers in England, Scotland and Wales - is next up for review. In May, energy regulator Ofgem said the typical household should expect to see an £800 increase, to £2,800 a year.
But Mr Brearley has now told MPs it is "clear" that "prices are looking higher than they did when we made that estimate". However, it now says "prices are looking higher than they did when we made that estimate".
He wouldn't be drawn on exactly how much prices will increase. Energy industry analysts Cornwall Insight said the typical domestic customer was likely to pay £3,244 a year from October, then £3,363 a year from January.
But one industry analyst has predicted a rise of more than £1,200 a year in October. Cornwall Insight said that the typical domestic customer was likely to pay £3,244 a year from October, then £3,363 a year from January. Another analyst, management consultancy BFY, predicted a typical energy bill could hit £3,850 a year by January.
The typical bill at present is about £2,000 a year, after the last price cap increase in April 2022. This is already £600 more than the average bill was in October 2021. The average bill was £1,400 a year in October 2021. The last price cap increase, in April 2022, saw that rise to £2,000.
Why is the energy price cap rising so much? What is the energy price cap and why is it rising so much?
The energy price cap is designed to protect consumers from short-term changes in prices. It is adjusted every six months (although Ofgem wants to reduce the gap to three months). The energy price cap is designed to protect consumers from short-term price changes.
The level is based on the price energy suppliers pay producers for electricity and gas. It is adjusted every six months and is based on the price energy suppliers pay producers for electricity and gas.
This has risen sharply because demand for gas increased as the Covid pandemic eased, and because the war in Ukraine has threatened supplies from Russia. This has risen sharply because demand for gas increased when Covid restrictions eased, and because the war in Ukraine has threatened supplies from Russia.
How Russia is cutting off gas to Europe
Can the world cope without Russian oil and gas?
The price cap doesn't apply in Northern Ireland, but households there have also seen bills rise.The price cap doesn't apply in Northern Ireland, but households there have also seen bills rise.
What's been the effect on customers? What's the effect on customers?
There have been warnings that UK households are facing a "cost of living catastrophe". Fuel costs are one of the main reasons UK inflation - the rate at which prices increase - is over 9%. This is higher than at any point in the past 40 years.
Fuel costs are one of the main factors which have driven the UK inflation rate up to 9% - its highest for 40 years.
Many people are expected to face "fuel poverty" - when a household has to spend a high proportion of its income on energy bills.Many people are expected to face "fuel poverty" - when a household has to spend a high proportion of its income on energy bills.
According to the National Energy Action (NEA) charity: "Millions will simply not be able to heat their homes [this winter]. We will see serious ill-health and early deaths for those most susceptible to the cold." Consumer champion Martin Lewis said many people will be unable to cover the increase in bills.
According to the National Energy Action charity: "Millions will simply not be able to heat their homes [this winter]. We will see serious ill-health and early deaths for those most susceptible to the cold."
What help am I getting to pay my energy bills?What help am I getting to pay my energy bills?
All households in England, Wales and Scotland will be given a one-off £400 discount on their fuel bills in October. All households in England, Wales and Scotland will be given a one-off £400 discount on their fuel bills in October. The government says customers in Northern Ireland will also get the money.
The government says customers in Northern Ireland - which has a separate energy market - will also get the money, although it is not yet clear how. This will be applied in monthly instalments over six months, with a reduction of £66 in October and November, and £67 a month from December to March 2023.
Direct debit and credit customers will have the money credited to their account. Customers with pre-payment meters will have the money applied to their meter, or paid via a voucher.
In addition, a £650 payment will be made to more than eight million low-income households who receive Universal Credit, tax credits, pension credit and other means-tested benefits.In addition, a £650 payment will be made to more than eight million low-income households who receive Universal Credit, tax credits, pension credit and other means-tested benefits.
Disabled people will also receive £150 (plus the £650 payment if they also qualify for that).Disabled people will also receive £150 (plus the £650 payment if they also qualify for that).
And pensioner households who receive the winter fuel payment will get £300.And pensioner households who receive the winter fuel payment will get £300.
So in theory, a low-income pensioner who has a disability could get £1,500.So in theory, a low-income pensioner who has a disability could get £1,500.
How do I get the £400 energy grant and £650 cost-of-living payment?How do I get the £400 energy grant and £650 cost-of-living payment?
What other help is available?What other help is available?
The government is doubling the Household Support Fund to £500m. This money is given to local authorities in England to support vulnerable families.The government is doubling the Household Support Fund to £500m. This money is given to local authorities in England to support vulnerable families.
Households in England whose homes are in bands A-D should have already been given a £150 council tax rebate to cope with the rise in fuel prices. Similar schemes are in place in Wales and Scotland. Households in England whose homes are in bands A-D should have received a £150 council tax rebate to help cope with the rise in fuel prices. Similar schemes are in place in Wales and Scotland.
English councils also have access to a "discretionary fund" to make extra payments, including to people living in other council tax bands.English councils also have access to a "discretionary fund" to make extra payments, including to people living in other council tax bands.
In Northern Ireland the government has been given money to make payments, but political uncertainty there has meant the cash hasn't yet been released.In Northern Ireland the government has been given money to make payments, but political uncertainty there has meant the cash hasn't yet been released.
Eligibility is also being expanded for the Warm Home Discount, which offers low income households a £150 one-off annual discount on their electricity bill between October and March.Eligibility is also being expanded for the Warm Home Discount, which offers low income households a £150 one-off annual discount on their electricity bill between October and March.
All the big energy firms have hardship funds, and customers can also get advice from organisations including the NEA, Citizens Advice, Turn2Us or the StepChange debt charity.All the big energy firms have hardship funds, and customers can also get advice from organisations including the NEA, Citizens Advice, Turn2Us or the StepChange debt charity.
What can I do to save on fuel costs?What can I do to save on fuel costs?
Fuel providers are currently not generally trying to tempt new customers with cheap offers. Most people who are already on fixed deals are advised to stay put. Fuel providers are currently not generally trying to tempt new customers with cheap offers. Most people on fixed deals are advised to stay put.
Otherwise, households are being encouraged to save money by improving energy efficiency. Otherwise, households are being encouraged to improve energy efficiency.
The Energy Saving Trust says several small changes could help offset some of the rising energy costs. The Energy Saving Trust says several small changes could help.