The energy price cap explained

Ofgem has confirmed a staggering 54% rise on the energy price cap from April 2022, lurching from £1277 set in October 2021 to £1971. With an average of £695 in energy price hikes for the 22 million households on a variable rate, and huge rises for those coming to the end of their fixed price deals, many will be wondering what help is on hand to pay the bills. 

What is the energy price cap?

The energy price cap has traditionally changed every six months, on 1st April and 1st October and was introduced in 2019. It sets the top figure that those on dual-fuel rates should be charged for typical yearly usage of gas and electricity. It has nearly doubled in a year, with April 2021’s cap set at £1024. While it provides a cap for typical use, those with high energy use can find their bills well in excess of the cap. Higher energy use can be for many reasons including larger families, larger homes, or inefficient heating systems, poor insulation, and higher than average use of appliances. Additionally those on pre-payment meters typically pay higher rates.

Why are prices rising?

It all comes in the wake of record gas energy market prices caused by the global supply crisis. The cost of gas has risen four-fold within a year. This has been exacerbated by depleted supplies due to last year’s cold winter in Europe, increased demand from Asia and China, plus low production of renewable energy from sources such as wind turbines, due to a calm summer. The UK is particularly vulnerable to gas price rises because 85% of homes are heated using gas and 40% of our electricity is generated via gas.

What is the government doing?

The Government is introducing measures to cut bills, including:

• Help for domestic electricity customers in England, Scotland and Wales with a £200 discount on their bills in October 2022, which will be repayable. The discount will automatically be repaid in equal £40 payments over five years.
• £150m to aid energy customers in Northern Ireland. 
• In April 2022, households in England in Council Tax bands A-D will receive a £150 Council Tax Energy Rebate. This will not need to be repaid.
• Discretionary funding of £144 million will also be provided to support vulnerable people and individuals on low incomes that do not pay Council Tax, or that pay Council Tax for properties in Bands E-H.
• Devolved governments in Scotland, Wales and Northern Ireland are expected to receive around £565 million of Barnett funding as a result of the Council Tax Energy Rebate in England.
• Eligibility for the Warm Homes Discount will expand by almost a third to benefit three million vulnerable households and will increase from £140 to £150 from October.

Is there anything I can do?

Even with Government help in place, many will be put in a dire financial position from April when the price rises bite. Heating and hot water accounts for over 50% of average fuel bills, and so key to cutting costs will be how you use your appliances and the general energy efficiency of your home. Kevin Wellman, CEO of the Chartered Institute of Plumbing and Heating Engineering (CIPHE) said, “Firstly you need to take steps to ensure you are using all your appliances in an energy efficient way. Make sure you are using heating controls such as a thermostat and timer so you are only heating your house when you need to. Don’t heat areas like spare rooms that aren’t in use and make sure your boiler is regularly serviced to ensure it’s working efficiently and effectively.”

“If your loft isn’t insulated you could be losing around a quarter of the heat from your home through the roof space. Draught-proofing improvements such as blocking up unwanted gaps surrounding windows, doors and chimneys, will help you save on energy bills and keep your house warm. Free grants are available from some energy suppliers under the Energy Company Obligation (ECO) scheme.”

“Make sure you use your appliances sensibly and identify those that are electricity guzzlers, such as tumble dryers and electric fan heaters, and use them sparingly. Small changes to your everyday routine can make a big difference. Turning your thermostat down by 1^oC can save money on your bills while still keeping your home comfortable. Taking a shower instead of a bath can also reduce both water and water heating costs.

“Last but not least if you are having issues paying your energy bills, please don’t ignore the problem. Talk to your supplier straight away as help schemes are available.”

For more tips and advice on lowering your heating bills please visit www.ciphe.org.uk/energybills