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What is the energy cap and why are energy bills so high? What is the energy cap and why are energy bills so high?
(about 5 hours later)
The boss of one of the UK's biggest energy suppliers says up to 40% of customers will be in fuel poverty by October. A typical UK household could be facing an annual energy bill of about £2,800 from this autumn, the boss of the UK's energy regulator has warned.
Fuel prices have gone up by hundreds of pounds for many UK households since the beginning of April, and are expected to rise further in the autumn. Ofgem chief executive Jonathan Brearley told MPsthat the energy price cap - currently at £1,971 - could reach this new level in October due to continued volatility in the gas market.
E.On UK warns 40% of customers face fuel poverty His comments come a few days after the boss of one of the UK's biggest energy suppliers warned that up to 40% of customers could be in fuel poverty by October.
What's happened to fuel bills?What's happened to fuel bills?
Bills rose for millions of families in April because of an increase in the energy price cap, which is the maximum price that suppliers in England, Wales and Scotland can charge households. Bills rose for millions of families in April this year because of an increase in the energy price cap, which is the maximum price that suppliers in England, Wales and Scotland can charge households.
This meant an average increase of £693 for around 18 million households on standard tariffs - and £708 for 4.5 million prepayment customers. This meant an average increase of £693 for about 18 million households on standard tariffs - and £708 for 4.5 million prepayment customers.
Cost of living: What are Rishi Sunak's options?Cost of living: What are Rishi Sunak's options?
How would a windfall tax on energy firms work?How would a windfall tax on energy firms work?
In October, the next time the cap is reviewed, prices are again expected to rise significantly, as a result of volatility in the wholesale markets. This could take the typical energy bill to as much as £2,800, if not higher. The energy cap will be reviewed again in October, and Ofgem's Mr Brearley has now given the clearest indication yet that another huge hike is on the cards.
While Mr Brearley said that Ofgem was only part way through reviewing prices ahead of the next change, he said: "We are expecting a price cap in October in the region of £2,800."
Fuel poverty means a household spends a high proportion of its income on energy bills.Fuel poverty means a household spends a high proportion of its income on energy bills.
Michael Lewis, the chief executive of E.On, said about one in eight of his company's customers were already struggling to pay their bills, even before the weather turns colder.Michael Lewis, the chief executive of E.On, said about one in eight of his company's customers were already struggling to pay their bills, even before the weather turns colder.
There has been a similar warning from Keith Anderson, the chief executive of Scottish Power.There has been a similar warning from Keith Anderson, the chief executive of Scottish Power.
Why has the energy price cap risen so much?Why has the energy price cap risen so much?
The wholesale price of gas rose sharply over the last year - even before the war in Ukraine. The wholesale price of gas - the price that UK fuel companies pay gas suppliers - has risen sharply over the past year, even before the war in Ukraine.
This is the price that UK fuel companies pay gas suppliers. However, because the cap is only adjusted every six months, the companies were only able to pass these price rises on to customers last month.
However, because the cap is only adjusted every six months, the companies were only able to pass these price rises to customers last month.
The price cap doesn't apply in Northern Ireland, but households there are also seeing bills rise.The price cap doesn't apply in Northern Ireland, but households there are also seeing bills rise.
Energy firms ordered to explain direct debit hikesEnergy firms ordered to explain direct debit hikes
What help is available?What help is available?
Households in England are being given a £150 council tax rebate to cope with the rise in fuel prices, if their homes are in bands A-D. Similar schemes are in place in Wales and Scotland.Households in England are being given a £150 council tax rebate to cope with the rise in fuel prices, if their homes are in bands A-D. Similar schemes are in place in Wales and Scotland.
English councils also have access to a "discretionary fund" for extra payments, including to people living in other council tax bands.English councils also have access to a "discretionary fund" for extra payments, including to people living in other council tax bands.
In Northern Ireland, where there is no council tax system, the government has been given money to make payments, but political uncertainty has meant the cash hasn't yet been released.In Northern Ireland, where there is no council tax system, the government has been given money to make payments, but political uncertainty has meant the cash hasn't yet been released.
Confusion over council tax rebate timingConfusion over council tax rebate timing
Poorest could miss out on £150 council tax rebatePoorest could miss out on £150 council tax rebate
Under a separate scheme, in October, customers in England, Scotland and Wales will receive a £200 rebate on their energy bills which they will have to repay at £40 a year for five years, from April 2023.Under a separate scheme, in October, customers in England, Scotland and Wales will receive a £200 rebate on their energy bills which they will have to repay at £40 a year for five years, from April 2023.
Eligibility is also being expanded for the Warm Home Discount, which offers low income households a £150 one-off annual discount on their electricity bill between October and March.Eligibility is also being expanded for the Warm Home Discount, which offers low income households a £150 one-off annual discount on their electricity bill between October and March.
All the big energy firms have hardship funds, and customers can also get advice from organisations such as Citizens Advice, Turn2Us or the StepChange debt charity.All the big energy firms have hardship funds, and customers can also get advice from organisations such as Citizens Advice, Turn2Us or the StepChange debt charity.
Is more help on the way?
Political pressure has been growing for the government to introduce a windfall tax on the energy companies, to help raise money to assist hard-pressed households.
Labour, the Liberal Democrats and the SNP all back the measure, and while the government has so far resisted introducing such a tax it has not ruled it out.
Prime Minister Boris Johnson has said he is "not attracted intrinsically to new taxes", he has also said that "no option is off the table" to tackle rising living costs.
How do energy prices affect the cost of living?How do energy prices affect the cost of living?
The Resolution Foundation think tank has warned that UK households are facing a "cost of living catastrophe".The Resolution Foundation think tank has warned that UK households are facing a "cost of living catastrophe".
Prices are rising by 9% a year in the UK - the highest rate for 40 years - partly as a result of rising fuel and food costs. A National Insurance increase in April also left millions facing higher tax bills.Prices are rising by 9% a year in the UK - the highest rate for 40 years - partly as a result of rising fuel and food costs. A National Insurance increase in April also left millions facing higher tax bills.
The Bank of England has put up interest rates to their highest level for 13 years to try to slow price rises, but has warned that inflation could be over 10% by the end of the year.The Bank of England has put up interest rates to their highest level for 13 years to try to slow price rises, but has warned that inflation could be over 10% by the end of the year.
Why are prices rising so quickly?Why are prices rising so quickly?
Four things that are going up in price and whyFour things that are going up in price and why
What can I do to save on fuel costs?What can I do to save on fuel costs?
At the moment, fuel providers are not generally trying to tempt new customers with cheap offers, although a few firms, including British Gas and EDF, are offering new fixed price deals to some existing customers, which may be worth considering.At the moment, fuel providers are not generally trying to tempt new customers with cheap offers, although a few firms, including British Gas and EDF, are offering new fixed price deals to some existing customers, which may be worth considering.
People who are already on fixed deals are advised to stay put.People who are already on fixed deals are advised to stay put.
Otherwise, households are being encouraged to save money by improving energy efficiency.Otherwise, households are being encouraged to save money by improving energy efficiency.
The Energy Saving Trust says several small changes could help many people off-set some of the recent rises in energy costs.The Energy Saving Trust says several small changes could help many people off-set some of the recent rises in energy costs.