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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?
(12 days later)
Household energy bills are expected to rise even higher than previously feared, analysts say. UK households will find out how much their bills will increase when a new energy price cap is announced on Friday.
Cornwall Insight has predicted that annual bills - based on the number of gas and electricity units a typical customer uses - could reach £4,266 in January, leading to fears about how people will cover the costs. The average annual household bill for gas and electricity could go on to reach £4,650 in January, according to analysts Cornwall Insight.
How high are bills going to go? Plans to cut bills for some households using less power at peak times will be announced soon.
The energy price cap - the maximum amount suppliers can charge customers in England, Scotland and Wales for each unit of energy - will go up in October. What is the energy price cap?
Energy industry analysts Cornwall Insight predict an average annual bill will reach £3,582 at this point - £200 higher than the previous estimate. The price cap is the maximum price suppliers can charge households for each unit of energy they use. It is set by Ofgem, the energy regulator.
And in January 2023, the next time the cap is due to be changed, it expects it to go up again to £4,266. In April it was raised by an unprecedented 54% - meaning a household using a typical amount of gas and electricity would pay £1,971 per year.
The higher estimate means the average household would be paying £355 a month, instead of £164 a month currently. If you use a lot of energy compared with others, your bill will be higher than the average price cap figure. If you use less, it will be lower.
The average bill was £1,400 a year in October 2021. Ofgem will now adjust the cap every three months, based on how much energy suppliers are paying the firms which produce electricity and gas.
Warning energy prices to hit over £4,200 in January It is in force in England, Scotland and Wales, and is designed to protect consumers from short-term changes. Energy prices in Northern Ireland are governed separately, but they have also risen sharply.
However, the energy regulator Ofgem, has questioned the reliability of future forecasts and urged "extreme caution" over predictions for January. How high might bills go?
What is the energy price cap and why is it rising so much? The average annual household bill could go up to £3,554 when the price cap for October is announced, Cornwall Insight says.
The energy price cap is designed to protect consumers from short-term price changes. It expects the average bill to increase again in January, to £4,650.
It is adjusted by Ofgem every three months and is based on the price energy suppliers pay producers for electricity and gas. October's price cap is due to be announced at the end of this month. That is £388 a month, rather than the current £164 a month.
Energy prices have risen sharply because demand for gas increased when Covid restrictions eased, and because the war in Ukraine has threatened supplies from Russia. However, Ofgem has urged people to treat predictions of future price cap levels with "extreme caution".
Ofgem recently changed the rules so the cap can be revised every three months instead of every six, saying this would make it less likely that more energy suppliers would collapse. UK inflation could hit 18% next year, experts warn
Cornwall Insight said this change was one of the reasons it had increased its estimates. Would it help to use energy off peak and use a smart meter?
Plans to enable households to get discounts on electricity bills if they cut use at peak times are set to be announced within a couple of weeks.
Those who stop using items like tumble dryers, dishwashers and games consoles between 17:00 and 20:00 could get rebates of up to £6 for every kilowatt hour (kWh) saved, National Grid ESO, which will run the scheme, said.
However, it's likely only households with smart meters will qualify, and it typically takes a few weeks to get one installed.
The Energy Saving Trust says several small changes could also help.
Why is the energy cap being raised so high?
Energy prices rose sharply when lockdown was lifted and the economy returned to normal speed.
They have also increased because the war in Ukraine has reduced supplies of gas from Russia.
Gas and electricity producers have raised their prices so rapidly that many energy suppliers have collapsed.
Ofgem has been raising the price cap to try and ensure the remainder stay in business.
How Russia is cutting off gas to EuropeHow Russia is cutting off gas to Europe
Can the world cope without Russian oil and gas?Can the world cope without Russian oil and gas?
The price cap does not apply to businesses or in Northern Ireland, but households there have also seen bills rise.
What's the effect on customers?What's the effect on customers?
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 price rises are expected to pitch many people into fuel poverty.
Many people are expected to face "fuel poverty" - when a household has to spend a high proportion of its income on energy bills. Energy company E.on UK suggests one in eight households are currently struggling to pay their bills, and says 40% may be struggling by October.
It's possible that customers paying for their energy by direct debit could see the amount they pay increase before the cap rises in October. Rising numbers of people will fall sick and see their health worsen unless the government takes further action to limit energy price rises, the NHS says.
That's because companies base the amount you pay each month on how much they expect your energy to cost in the coming year, building up a credit during the summer to pay for the higher usage in the winter. The NHS Confederation said many people would have to choose between skipping meals to heat their homes or having to live in cold and damp conditions.
You are able to reject an increase to your direct debit, although you may end up having to pay more later in the year.
Energy bills could go up before October price cap riseEnergy bills could go up before October price cap rise
What help am I getting to pay my energy bills? What help will I get 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. The government says customers in Northern Ireland will also get the money. All UK households will be given a one-off £400 discount on their fuel bills in October.
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. £650 will be paid to more than eight million low-income households who receive benefits or tax credits.
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. There are additional payments of £300 to pensioner households and £150 to individuals receiving disability 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. Vulnerable families can also claim help through the Household Support Fund, the Warm Home Discount scheme, and hardship funds run by energy companies.
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.
So in theory, a low-income pensioner who has a disability could get £1,500.
The government has rejected introducing any new big measures until a new prime minister is in place.
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 happens if I don't pay my energy bills?
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 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.
Payments have also started being made in Northern Ireland.
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.
What happens if you don't pay your energy bills?
Your supplier must give you a chance to pay your debt through a payment plan.Your supplier must give you a chance to pay your debt through a payment plan.
If you don't agree to a plan with your supplier, they might try to force you to have a pre-payment meter installed. If you don't agree to this, they may try and make you have a pre-payment meter installed.
In very rare cases - if you haven't paid a bill after 28 days - you might be threatened with disconnection of your supply but you'll normally be offered a meter instead. In extreme cases, you might be threatened with disconnection.
What can I do if I can't afford my energy bill?What can I do if I can't afford my energy bill?
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 on fixed deals are advised to stay put.
Otherwise, households are being encouraged to improve energy efficiency.
The Energy Saving Trust says several small changes could help.
How are you preparing for the rise in energy bills and cost of living? You can get in touch by emailing: haveyoursay@bbc.co.uk.How are you preparing for the rise in energy bills and cost of living? You can get in touch by emailing: haveyoursay@bbc.co.uk.
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