Energy bills will increase for UK households tomorrow (April 1), with the energy cap rising by 54% to £1,971.
In February, energy regulator Ofgem announced the new price cap – the maximum amount that suppliers can charge the ‘average user’ in Great Britain.
Unsurprisingly, this has left many people worried about how to pay while struggling to understand exactly what is happening, how it will impact them, and what can be done to keep costs down.
Here, Metro.co.uk answers all your key questions on rising bills.
Energy bills in the UK are rising for a simple reason – supply and demand.
There’s a lot of demand for gas right now as the cold weather continues across the Northern Hemisphere at the same time as economies emerge from Covid-19 restrictions.
Prime Minister Boris Johnson compared this sudden jump in demand to ‘everybody going to put the kettle on at the end of a TV programme’.
While demand is higher than usual, there’s tight supply at the moment, and this means that those selling gas wholesale can charge more for it.
Energy firms were going bust left, right and centre late last year, as wholesale gas prices skyrocketed.
This is happening all over the globe, but the UK has been particularly affected because we consume much more gas than many of our European neighbours.
According to the BBC, 85% of homes in the UK use central heating.
That’s a huge figure. We also don’t have a huge back-up store of gas available, either.
Since the energy suppliers have to pay these huge prices for wholesale gas, a big chunk of that extra cost falls on the consumer – aka your average household.
Amid all the worrying headlines about the energy crisis, there are some things you can do to reduce costs.
First things first, make sure you are paying the right amount. Your energy bill should reflect the amount of gas or electricity you’ve used.
That might sound obvious, but many people don’t provide meter readings, relying instead on their providers to send them estimated bills.
This could result in paying too much over summer, when your bill might be calculated on your average use during winter. It could also result in owing big chunks of money if your supplier initially underestimates how much you have used.
To keep your bills accurate, you should send your supplier a regular meter reading.
If you still think you are paying too much, Citizens Advice has some tips on what to do next.
Bills are likely to fluctuate over the year, going up in the colder months when you are likely to use more appliances that are expensive to run – such as the tumble dryer and heating.
Households are charged a set rate for each kilowatt-hour of electricity or gas they use, and it is this consumption that makes up the bulk of your bill.
Moneyexpert.com has a handy calculator to determine how much energy you’re using at home, particularly through appliances, and how much it’s costing you.
Knowing this might help you keep costs down a little by reducing how much energy you use.
However, that is easier said than done as the cold nights set in – and you may be better off switching providers in order to keep the costs down.
At a time when the cost of living is already rising, a key question on everybody’s lips is how to keep energy prices down.
Since the price cap was introduced, the cheapest tariffs on the market have been mostly £200 or cheaper.
Money-Saving Expert Martin Lewis has previously advised that by switching and fixing tariffs yearly, you can lock in the lowest price for 12 months, protecting yourself against future price rises.
So in normal circumstances, switching is a good way to beat the price cap and save money.
But, these are not normal circumstances, and Mr Lewis says switching might not be the right thing to do at the moment.
For the last few months, he has said that sticking to the cap has been the best move for most, as it has been cheaper than fixed energy deals.
Alternatively, if you’re not looking to switch suppliers, but still hoping to cut costs, there are some simple steps to try.
Given the state of the market, there aren’t many (if any) better-fixed tariff deals to snap up, so switching supplier probably isn’t the greatest idea.
Mr Lewis says that for most people, it is better to remain on the price cap in April, as the market’s cheapest fix right now is an average 56% more than the cap.
However, for the first time in many months, fixing may be worth it for a few people.
Mr Lewis says that if you’re offered a fixed deal that’s no more than 40% more expensive than your current price-capped tariff, it’s worth considering – especially if you value budgeting certainty.
To find deals, you can do a cheap fix comparison here.
The risk of fixing now is that if wholesale prices drop, you may lose out on a cheaper deal later down the year. Then again if you don’t fix now, and if prices rise, fixes could get even more expensive than current ones on offer and you’re stuck on a cap that is likely to rise further again in October.
Confused? You aren’t the only one.
Mr Lewis recently admitted being close to tears and shaking for being unable to offer advice on how to help people save for the first time in his career due to the energy crisis.
Unfortunately, there’s really not much we can do about this further increase to our energy bills.
If you are struggling to pay your bills right now, then contact your energy supplier to discuss a payment plan. It’s also worth checking if you are eligible for the warm homes discount.
Rishi Sunak has also announced a plan to support families struggling with the rising costs.
The Energy Bills Rebate will provide around 28 million households with an upfront discount on their bills worth £200.
Energy suppliers will apply the discount to domestic electricity customers from October, with the Government meeting the costs.
The discount will then be automatically recovered from people’s bills in equal £40 instalments over the next five years. This will begin from 2023, when global wholesale gas prices are expected to come down.
In the meantime, you can follow this expert guidance on saving money on your energy bills.
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