Explained: How much extra will I pay on my energy bill?
- Credit: PA
Householders are preparing to see their energy bills rise when a new price cap comes into effect - but how will it affect me?
The energy price cap, which is set by regulator Ofgem and limits how much providers charge per unit, is going up by 54% on April 1 because of an unprecedented rise in gas prices.
It has now gone up to £1,971, meaning energy prices for millions of households are set to rise by almost £700 a year.
Based on estimates, a small house or flat with one or two bedrooms is likely to see their average monthly cost rise from £66 to £101 after April 1.
A medium house of three bedrooms could see prices surge from £97 to £149, while larger homes could see a rise from £137 to £211.
It has been reported that Ofgem may also announce a further rise in the price cap in October.
What is the price cap?
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The price cap was introduced back in 2019 and sets the figure that can be charged to customers by providers on a variable dual-fuel rate for a six-month period.
It is based on a number of factors, including the wholesale cost of power in the last six months
However, it is not the maximum that can be charged - it reflects typical energy use levels.
What support is available?
Chancellor Rishi Sunak promised to “take the sting out” of the price rises.
He said that all 28 million households in Britain would get a £200 up-front rebate on their energy bills from October.
The Government will provide the cash for this, but it wants the money back so will hike bills by £40 per year over the next five years from 2023 to recoup its cash.
If all goes to plan, wholesale energy prices will drop so households can pay back what they owe, without a major rise in bills.
However experts have said they are not sure this will happen. Goldman Sachs has already warned that prices in the gas market are likely to remain at twice their usual levels until 2025.
Mr Sunak also promised a £150 council tax rebate for homes in bands A to D, something he said would cover around 80% of homes in England.
He also promised £144 million to councils to support vulnerable people.
“The price cap has meant that the impact of soaring gas prices has so far fallen predominantly on energy companies,” the Chancellor told MPs.
“So much so that some suppliers who couldn’t afford to meet those extra costs have gone out of business as a result.
“It is not sustainable to keep holding the price of energy artificially low.
“For me to stand here and pretend we don’t have to adjust to paying higher prices would be wrong and dishonest.
“But what we can do is take the sting out of a significant price shock for millions of families by making sure that the increase in prices is smaller initially and spread over a longer period.”
What has Ofgem said?
Ofgem chief executive Jonathan Brearley said: “We know this rise will be extremely worrying for many people, especially those who are struggling to make ends meet, and Ofgem will ensure energy companies support their customers in any way they can.
“The energy market has faced a huge challenge due to the unprecedented increase in global gas prices – a once in a 30-year event – and Ofgem’s role as energy regulator is to ensure that, under the price cap, energy companies can only charge a fair price based on the true cost of supplying electricity and gas.
“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.”