Rising energy costs - what’s going on?
What’s happening with energy costs?
Following last Autumn’s hike in the price of gas and electricity, energy bills rose further in April 2022 (by another 54%)and then again at the start of October 2022. There was a real worry that prices would keep going up (this was due to happen every three months), due to continually rising costs for gas and electricity, making fuel payments increasingly difficult and causing widespread problems for a huge number of people - October’s price rise was predicted to be by another 80%: an unprecedented and incredibly worrying figure.
In September, the Government took much-needed action, with new Prime Minister Liz Truss announcing that there would be a new ‘price guarantee rate’, fixed for two years, to insulate households from even higher global gas prices. This meant that the predicted October rise would now not be as drastic as it would have been without intervention.
The upshot of this new policy is that instead of the expected 80% rise in prices, electricity and gas bills have risen around 27% - in real terms, that makes the average household bill around £2500, instead of the £1971 it was before October.
What does the ‘price cap’ mean, and what’s the ‘price guarantee rate’?
The term ‘price cap’ has been used a lot by the media, and can be misleading - it’s important to realise that there is no cap, or maximum ceiling, on the cost of an energy bill - you will still pay more if you use more energy. And the figures quoted above are indeed for an average household, as an example, rather than for any household!
What has been capped, or guaranteed, is the cost per unit (kWh) of energy, and the standing charges (i.e. the daily fee), so that energy suppliers cannot charge any more than the set prices for those - this is the new ‘price guarantee rate’
How much will I have to pay under these new rates?
You can get an estimate of what your bills will likely be going forward by using Money Saving Expert’s energy price guarantee rise calculator - you feed in some basic details about your energy use, how you pay your bills, and the region you live in, and the calculator churns out an estimate to give you a realistic working figure.
What happens if I’m currently on a fixed tariff for my energy bills?
If you are currently on a fixed tariff for your electricity or gas bills, you may have seen your monthly payments go down (to a minimum o the new guarantee) - they certainly won’t rise due to the recent price guarantee rate announcement. What exactly will happen will depend on the specifics of your tariff - Martin Lewis has some clear guidance on this topic here.
What help is available?
The government is putting £400 towards every household’s energy bills, which will be split up into monthly installments of £66 or £67 from October ‘22 until March ‘23. There are also other cost-of-living schemes, to support people in particular groups with additional payments - you can find full details about these schemes, including an eligibility checker for each scheme, on the gov.uk website here.
All of the above payments will be made automatically - please beware of scammers who may try to convince you to take some kind of action in order to receive the money you are due - for example, they might pose as Ofgem (the energy regulator), or the government. You can find more details about what to look out for here.
In addition, support is available through individual energy companies, charitable grants, and debt advice agencies if you are worried about or have fallen behind with your energy bills, or are in other kinds of debt. Our article on these additional areas of support has more information.