Our last article addressed why energy prices are spiralling in the UK. Now, we’re answering another essential question: how much are energy bills going up? This article delves into everything you need to know about energy price increases and how they might affect you.  

How much are energy bills going up?

Unfortunately, there’s no definitive answer to how much energy bills are going up. Instead, estimations are based on the ‘typical household’ in the UK. Ahead of the Government’s recent announcement, typical household bills were forecasted to rise from £1,971 to £3,549 per year. To combat soaring energy costs, the Government introduced an energy price guarantee, which means a typical household’s energy bill will now rise from £1,971 to £2,500.  

What is the energy price guarantee? 

The Government introduced the energy price guarantee to ‘cap’ energy bills in the UK, which comes into effect on 1 October. The energy price guaranteed replaces the energy price cap reviewed and set by Ofgem – the Office of Gas and Electricity Markets. Below is the key information you need to know about the energy price guarantee: 

• The energy price cap was due to increase by 80% as of 1 October for 24 million people in England, Scotland, and Wales.
• The guarantee was to remain active for two years, but will now come to an end in April 2023.
• The guarantee applies to all households in England, Scotland, and Wales. 
• The guarantee is not a limit on how much you’ll pay. This figure is calculated using an ‘average household’. The price you pay remains dependent on your energy usage. 

How much have energy bills gone up this year? 

In April 2022, the price cap increased by 54% and was due to be increased further by 80% on 1 October. The energy price guarantee means that prices will increase by 27% from the summer 2022 cap. However, there is some good news. According to the Government, this figure is lower than the original Q4 2022 price cap and significantly lower than forecasts for 2023.  

Does the energy price guarantee affect me?

As mentioned above, the amount you’ll pay for energy depends on the amount of energy you use. So, the term ‘price cap’ can be misleading, as you may presume your bill will be capped to £2,500 regardless of your energy usage. As the £2,500 figure is based on a ‘typical household’, this doesn’t allow for the many variables that need to be considered. Factors that may affect your bill include: 

• The number of people living in your home.
• The type of property you live in.
• How much heating and power your household uses.

For example, if you’re living in a purpose-built flat, your bill could be around £1,750 per year, whereas if you’re living in a detached house, you could be looking at £3,300. Furthermore, the energy price guarantee also depends on your tariff. The cap applies if: 

• You’re on a default energy tariff, regardless if you pay by direct debit, standard credit or prepayment meter.

The cap won’t apply if:

• You’re on a fixed-term energy tariff.
• You have chosen a standard variable green energy tariff that Ofgem has exempted from the cap.

If you’ve recently been switched to a new tariff because your supplier stopped trading, you are likely on a price-capped tariff. However, contact your supplier if you’re unsure what tariff you’re on. Since introducing the guarantee, the Government has said many households on fixed deals would also receive a discount. However, households on an expensive fixed tariff could still pay more than those on a standard variable tariff.  

How does the energy price guarantee work? 

As the energy price guarantee replaces the energy price cap, it sets the highest figure suppliers can charge domestic households for every unit of energy they use. These units are displayed as kilowatt hours (kWh) on your bill. As of 1 October, dual-fuel customers on a standard variable tariff will be charged:

• 34p per kWh of electricity 
• 10.3p per kWh of gas 

Please note that average rates will vary by payment method, meter type and region. Therefore, it’s best to contact your supplier for personalised information to get a clearer picture of how the guarantee will affect you. Suppliers can’t charge customers more than the cap set by Ofgem. This is because Ofgem monitors suppliers to ensure their default tariff rates comply with the cap. However, these figures are worth noting for your peace of mind.  

A typical energy bill breakdown 

The October to December 2022 price cap covers the following:  

• 70% wholesale energy cost
• 10% network costs
• 5% operating costs
• 4% policy costs 
• 5% VAT
• 2% assumed suppliers’ profit margin
• 4% miscellaneous costs 

Energy Bills Support Scheme to help with rising costs

The Government has introduced the Energy Bills Support Scheme in response to rapidly rising energy costs. On 26 May 2022, the Chancellor announced the following measures had been put into place: 

• Every household in the UK will get a £400 energy bill discount in October. 
• Households that don’t use mains gas and electricity – for example, those using heating oil – will get an additional £100 discount. 
• A further one-off payment of £650 will be offered to around 8 million households on means-tested benefits. 
• For households claiming certain disability benefits, a one-off £150 cost of living payment is available. 
• A one-off payment of £300 will go to over 8 million pensioner households. 

Households may be eligible to receive several payments of this package.The National Grid has announced that they are working with Ofgem to launch a scheme aimed at paying households that avoid using electricity during peak times (5pm-8pm). Originally, households would be paid 52p per kilowatt hour saved during these peak times, but has now been increased to £3 per kilowatt hour, although it would only be available to homes with smart meters installed. If this scheme does get adopted by energy providers, people can expect to recoup some of the increased energy bill costs – further supporting UK residents in a time of high energy bills. 

Is there further support available if I can’t pay my bill? 

In addition to the above scheme, the Government have several measures in place to support affected households: The Warm Home Discount Scheme – which reopens in November 2022 – will allow eligible households £140 off their electricity bill. Household Support Fund – the Government has pledged an additional £500 million of local support through this fund. For more information, contact your local council. Winter Fuel Payment – this is a fuel payment for those born on or before 25 September 1956. Cold Weather Payment – this is a payment for every seven days of very cold weather from November to March.Further support, such as grants and services, may also be available from your energy supplier or charitable organisations. If you’re struggling to pay your energy bills, visit the Ofgem website for more information.   

How much are energy bills going up in 2023? 

While we hate to be the bearer of bad news, the energy price cap will likely increase in 2023. The Government’s energy price guarantee remains in place until April 2023, and then it is subject to change every quarter. Previously, Ofgem would set new rates every six months. Recently, they’ve switched to reviewing rates every three months due to market volatility. The table below shows you the price cap period and announcement dates for 2023. 

Energy saving tips 

We hope this article has given you plenty of practical advice and resources to help you navigate these challenging times. Finally, to wrap things up, we’re sharing five energy conservation tips to help you keep your bills as low as possible:

• Make use of a timer on your central heating, avoiding using any heating or hot water when you’re not home. 
• Close your curtains when it’s dark outside to prevent heat from escaping, and check your windows and doors for any draughts. 
• Switch to energy-saving products where possible, such as energy-saving lightbulbs. 
• Avoid leaving appliances on standby or charging unnecessarily. 
• Only use full loads when using the washing machine, tumble dryer, or dishwasher. 

If you’re keen to understand why energy bills are increasing, read our article here.By installing solar panels, you can help combat the energy price cap rise by producing your own electricity. You can even get paid for any excess energy that your solar system doesn’t use, by utilising Feed-In Tarriffs. Get in touch with us today to learn more.