Energy Costs Expected to Increase with New Price Cap Regulations
The energy regulator, Ofgem, is set to announce its latest price cap, and homes could see another rise in gas and electricity bills starting in April. This price cap limits how much energy suppliers can charge per unit of energy and affects around 26 million households across England, Wales, and Scotland. Analysts predict an increase of about 5% due to higher wholesale costs that suppliers have to pay.
This expected rise comes when people are already facing increased expenses from other areas like water bills and council taxes. However, average wages are also going up, which may help ease the financial strain on budgets.
The new price cap will impact people on default or variable tariffs. Ofgem revises the cap every three months, and the new rates will be published at 7:00 AM on April 1st. While the cap restricts the cost per unit of gas and electricity, it does not set a limit on the overall bill. Therefore, the total bill will still vary depending on individual energy usage.
Consultants from Cornwall Insight, known for their reliable predictions, estimate that a typical household’s energy bill could go up by £85 a year starting in April. This would bring the annual energy cost to about £1,823. They attribute this rise to recent colder weather and diminished gas reserves in Europe, which have led to significant hikes in wholesale prices.
If the price cap increases as anticipated, it would mark a third consecutive rise in energy bills. This situation has led to calls for consumers to seek better energy deals and for the government to provide help for those struggling to pay their bills. Simon Francis, who coordinates the End Fuel Poverty Coalition, expressed concerns saying that high energy costs have been a long-term issue, leaving households vulnerable to international energy markets and fossil fuel prices. He stressed the importance of transitioning away from dependence on gas and supporting those in financial need with their energy expenses.
Currently, the high energy prices have accumulated a total debt of £3.8 billion owed to suppliers by households. On average, a household in debt owes more than £1,500 for electricity and around £1,300 for gas. Energy bills today are roughly 50% higher than they were before the Covid pandemic, although they are not as high as the peak rates seen in 2022 when energy prices soared after Russia’s invasion of Ukraine.
Days before the cap announcement, Ofgem revealed plans for new tariff choices. These would adjust the fixed fees that cover gas and electricity connections, which have sparked some controversy. Following the news, there was a quick backlash regarding these financial changes.
To manage energy use and mitigate expenses during warmer months, experts have suggested a few simple approaches. For instance, if your hot water is too hot to wash your hands, lowering the boiler setting could help save energy. Additionally, effectively managing drafts around your home, such as blocking an unused chimney or sealing up other gaps, can retain heat and reduce energy consumption. Lastly, limiting shower time to just four minutes is a practical tip, and a charity called WaterAid even created a playlist of four-minute songs to help with timing.
If you are finding it difficult to pay your energy bills, more information and assistance can be found through various resources.
