BILL SPIKE
Energy bills to rise for millions this winter as price cap hiked to £1,717 a year
Around 29 million households are affected by the price cap
ENERGY bills are set to rise for millions of households this winter.
The energy regulator Ofgem has confirmed the new price cap, which comes into effect on October 1.
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The cap will rise from the current rate of £1,568 a year to £1,717.
It means the average household paying by direct debt for dual fuel will see their annual bill go up by £149, or around £12 a month - a 10% increase.
But bear in mind the exact amount you pay can be higher or lower depending on your usage, and the cap is reviewed every three months.
Around 29 million households are on standard variable tariffs which are affected by the price cap, according to Ofgem.
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The energy regulator said the price a supplier can charge for gas will rise from 5.48p per kWh today, to 6.24p from October 1.
The price of electricity will rise from 22.36p per kWh to 24.50p, Ofgem said.
Standing charges, which cover things like maintaining the network and operational costs, will rise to 31.66p from 31.41p a day for gas and from 60.12p to 60.99p for electricity.
Today, Ofgem has published its review into standing charges, including transferring parts of these fixed supplier costs to the unit rate.
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It said this could reduce the standing charge by between £20 and £100 per year.
The price cap also varies depending on the way you pay.
Standing charges continue to rise DESPITE gas and electricity costs falling - what it means for you and how to soften the blow
The £1,717 price cap from October will apply to those who pay by direct debit.
For those on prepayment meter it will be £1,669 and £1,829 for those paying on receipt of bills.
Experts at Cornwall Insight had predicted the energy price cap would rise to £1,714 in October.
Despite the rise, average bills remain considerably lower than during the peak of the energy crisis, which was fuelled by Russia's invasion of Ukraine in February 2022.
The war caused a spike in an already turbulent wholesale energy market, driving up costs for suppliers and customers.
The new cap is £117 - 6% - cheaper compared to the same period last year when it stood at £1,834.
Before the energy price shock a standard annual bill was £1,084.
Cornwall Insight is predicting another small increase to the energy price cap in January 2025 due to recent tensions in the Russia-Ukraine war.
Jonathan Brearley, chief executive of Ofgem, told BBC Breakfast: "I can’t predict that future gas price, so I can’t say what the price will be in January.
"But what I do know, the best judgment we have, is that this situation of being subject to the volatile gas markets is something that may last a long time, and that’s why we need to work with the Government, with the sector, to protect vulnerable customers this winter."
It's important to note though that the price cap is not a limit on the overall amount people will pay for their energy.
Instead, it caps the amount that they pay per kilowatt hour, or unit, for gas and electricity.
The figure is calculated based on what Ofgem thinks an average household will use.
This is calculated assuming that a typical household uses 2,900 kWh of electricity and 12,000 kWh of gas across a 12-month period.
When does the price cap change?
OFGEM reviews the cap on unit rates for those on the default tariff every three months.
This means the energy price cap can move up or down at four different points in the year.
Price cap rates are updated on the following dates:
- January 1
- April 1
- July 1
- October 1
Those who use less will pay less, and those who use more will pay more.
Be aware that the exact unit rates and standing charges you pay will vary slightly based on your supplier, where you live and how you pay for your gas and electricity costs.
The energy price cap is adjusted every three months to reflect changes in underlying costs.
The price cap for January 1 to 31 March 2025, will be published on November 25.
Try over interactive graph below to see how the energy price cap has changed over time.
If you're on a fixed tariff there will be no change to your bill, as you've locked in the price for a set period.
Some experts have expressed concern that households will now be going into the colder months facing higher bills.
Adam Scorer, National Energy Action chief executive said: "Struggling households are in the third year of an energy crisis.
"Even before the crisis, our clients had no slack in their budgets.
"Three years on, they are mired in record levels of energy debt and severely rationing their energy."
The new Labour Government decided to stop winter fuel payments for those who are not in receipt of pension credit or other means-tested benefits.
Previously, the payments of up to £300 had been available to everyone above state pension age.
The Treasury said the changes would see the number of pensioners receiving the payments fall from 11.4 million to 1.5 million – so just under 10 million would miss out.
It is thought that around 880,000 eligible pensioners do not receive pension credit and are cut off from the winter fuel payment.
Writing on X, formerly known as Twitter, Martin Lewis said: "Last year pensioner homes got up to £300 extra per household cost of living support - that’s gone, and its loss alone is far bigger than the saving made by slightly lower rates.
"Piling on top of that is the government's new decision to means-test Winter Fuel Payments, which will leave all except usually those who claim Pension Credit missing out on a further £200 - £300."
Meanwhile, Gillian Cooper, director of energy at Citizens Advice, said: "We’ve braced ourselves for a challenging winter but today’s price cap increase will no doubt see even more people fall behind on their energy bills.
"We’re particularly concerned about households with children and young people and those on lower incomes, who are most likely to struggle with their heating costs.
"Energy bills will now be around two-thirds higher than before the crisis, and with record levels of energy debt and the removal of previous support, people are in desperate need."
Get help with energy bills
THERE'S a number of different ways to get help paying your energy bills if you're struggling to get by.
Senior Consumer reporter Olivia Marshall explains how.
If you fall into debt, you can always approach your supplier to see if they can put you on a repayment plan before putting you on a repayment meter.
This involves paying off what you owe in instalments over a set period.
If your supplier offers you a repayment plan you don't think you can afford, speak to them again to see if you can negotiate a better deal.
Several energy firms have grant schemes available to customers struggling to cover their bills.
But eligibility criteria varies depending on the supplier and the amount you can get depends on your financial circumstances.
For example, British Gas or Scottish Gas customers struggling to pay their energy
bills can get grants worth up to £2,000.
British Gas also offers help via its British Gas Energy Trust and Individuals Family Fund.
You don't need to be a British Gas customer to apply for the second fund.
EDF, E.ON, Octopus Energy and Scottish Power all offer grants to struggling customers too.
Thousands of vulnerable households are missing out on extra help and protections by not signing up to the Priority Services Register (PSR).
The service helps support vulnerable households, such as those who are elderly or ill, and some of the perks include being given advance warning of blackouts, free gas safety checks and extra support if you're struggling.
Get in touch with your energy firm to see if you can apply.
Review into standing charges
Last year, Ofgem started a review of standing charges and today it has published the results on ways to reduce the charge for customers.
Some experts, including Martin Lewis, have argued that the charge unfairly penalises those on lower incomes.
But others have warned that ditching it could place a higher burden on those with higher energy usage like the elderly and disabled.
Standing charges are the fixed costs on bills that cover getting energy to people’s homes.
Ofgem said the options in the paper could reduce the standing charge by between £20 and £100 per year by transferring parts of these fixed supplier costs to the unit rate.
This is the price paid for every unit of energy used.
The regulator is also asking energy suppliers to offer energy tariffs that have no or low standing charges as well as their current tariffs.
This will mean that energy efficient households will be able to choose a tariff that rewards them for using less energy.
It will also mean that other energy customers can also choose from more tariffs that meet their needs.
In the long term, Ofgem has suggested a review into the allocation of network costs.
Ofgem chief executive Jonathan Brearley said that while the regulator was reviewing standing charges, “we can’t make those charges disappear”.
He told Sky News: “We have been told loud and clear that people don’t like standing charges the way they are now and what we’re doing today is setting out a series of choices about how we might reform them.
“But, as a regulator, there are no easy options. We can’t make those charges disappear.
“We can simply move them from that fixed charge to the amount you pay per unit on your energy bill.”
He told BBC Breakfast that Ofgem has been urged to be cautious with any reforms to avoid making some people worse off.
He said the regulator has to “tread carefully, but we’ve got options”, and that Ofgem would come out with firm decisions by the end of the year.
Support for prepayment meter customers
Ofgem has confirmed that suppliers will continue to be compensated for offering additional support credit for the most vulnerable customers.
This is the help that suppliers are obliged to offer to prepayment meter customers in need when they have exhausted all other options.
The support was initially set to remain in place for 12 months, but it will remain in place for at least another six, the regulator confirmed.
Ofgem said the decision means that the most vulnerable consumers will continue to be supported and have an energy supply this winter.
What can you do now?
The price cap dictates the price of standard tariffs, so the standard tariff will rise on October 1.
The main alternative tariffs being offered are fixes where you lock in - the price is not affected by the price cap.
Fixed deal offers move up and down based on the current supply that energy firms can get based on the current wholesale rates.
Earlier this month, several energy firms withdrew their cheapest fixed-rate deals, which could have saved customers hundreds of pounds.
But there are still a range of deals available.
The Sun has rounded up the fixed energy tariffs that are cheaper than the price cap and could save you money this winter.
The cheapest year-long fixes on the market right now are about 7% less than the new October price, according to Martin Lewis.
Richard Neudegg, director of regulation at Uswitch, said: "The cheapest 12 month fixed tariff, for the average household, is currently £1,592, representing a £125 annualised saving against October’s price cap, and offers protection against another potential rise in January.
"It’s important for households looking for certainty to run a comparison to see what’s available to them and see personalised prices based on how much energy they are likely to use."
As always, make sure to do some research and use a comparison tool such as MSE or USwitch.
Something to bear in mind though is that most comparison sites just give you the current price cap, while you need to look at the price cap over the next year to get the best view.
Of course, you should only switch to the cheapest fixes though, not all of them are bargains and some of them have hefty exit fees.
If you don’t want to commit to a fixed tariff it's always worth considering a variable tariff.
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These track wholesale gas and electricity costs, meaning your unit rates and standing charges can go up and down.
Just bare to mind that if want to switch to one of these tarrifs, you must have a smart meter.
How do I calculate my energy bill?
BELOW we reveal how you can calculate your own energy bill.
To calculate how much you pay for your energy bill, you must find out your unit rate for gas and electricity and the standing charge for each fuel type.
The unit rate will usually be shown on your bill in p/kWh.The standing charge is a daily charge that is paid 365 days of the year - irrespective of whether or not you use any gas or electricity.
You will then need to note down your own annual energy usage from a previous bill.
Once you have these details, you can work out your gas and electricity costs separately.
Multiply your usage in kWh by the unit rate cost in p/kWh for the corresponding fuel type - this will give you your usage costs.
You'll then need to multiply each standing charge by 365 and add this figure to the totals for your usage - this will then give you your annual costs.
Divide this figure by 12, and you'll be able to determine how much you should expect to pay each month from April 1.
Do you have a money problem that needs sorting? Get in touch by emailing [email protected].
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