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What is the energy price cap and why are bills going up so much? | What is the energy price cap and why are bills going up so much? |
(about 1 month later) | |
Typical household energy bills are likely to rise above £3,000 a year this winter, industry sources have warned BBC News. | |
This is more than the watchdog, Ofgem, was predicting when the government announced a support package to help offset soaring prices. | |
All UK households will receive a £400 discount on their fuel bills, while people on benefits will get an additional £650. | All UK households will receive a £400 discount on their fuel bills, while people on benefits will get an additional £650. |
When will I get the £400 and how will it be paid? | When will I get the £400 and how will it be paid? |
All households in England, Wales and Scotland will be given a one-off £400 discount on their fuel bills in October. | |
This replaces a previous plan to take £200 off bills, which would have had to be repaid over five years. | |
Direct debit and credit customers will have the money added to their account balance. | |
Pre-payment customers will have the discount applied to their meter or receive it via a voucher. | |
The government says customers in Northern Ireland - which has a separate energy market - will also get the money, although it is not yet clear how. | |
The payments will be partly funded by a temporary 25% tax on oil and gas companies' profits. | |
Who will get the £650 payment? | Who will get the £650 payment? |
A £650 payment will be made to more than eight million low-income households who receive Universal Credit, tax credits, pension credit and other means-tested benefits. | A £650 payment will be made to more than eight million low-income households who receive Universal Credit, tax credits, pension credit and other means-tested benefits. |
For many people it will be paid into bank accounts in two instalments - in July and the autumn. | |
Payments for those who only receive tax credits will follow shortly afterwards. | |
What other help is there? | What other help is there? |
Disabled people will receive £150 (plus the £650 payment if they also qualify for that). | Disabled people will receive £150 (plus the £650 payment if they also qualify for that). |
Pensioner households who receive the winter fuel payment will get £300. | Pensioner households who receive the winter fuel payment will get £300. |
So in theory, a low-income pensioner who has a disability could get £1,500. | So in theory, a low-income pensioner who has a disability could get £1,500. |
How fast are energy bills rising? | How fast are energy bills rising? |
The maximum price which suppliers can charge customers in England, Scotland and Wales is called the energy price cap. | The maximum price which suppliers can charge customers in England, Scotland and Wales is called the energy price cap. |
At the beginning of April, the price cap for a typical household rose by £700 from £1,277 to £1,971 per year. For pre-payment customers it increased from £1,309 to £2,017. How much you actually pay depends on how much energy you use. | |
Bills are expected to rise even further. | |
In May, Ofgem - which sets the price cap - said it could rise to about £2,800 from October, when it is next updated. | |
But BBC News has seen industry calculations suggesting typical households could in fact see bills above £3,000, however they pay. | |
The government said it did not recognise these latest figures but added it and Ofgem "keep a close watch on energy prices". | |
Why is the energy price cap rising so much? | Why is the energy price cap rising so much? |
The energy price cap is designed to protect consumers from short-term changes in prices. It is adjusted every six months (although Ofgem wants to reduce the gap to three months). | |
The cap is based on the price energy suppliers pay producers for electricity and gas. | |
This has risen sharply because demand for gas increased as the Covid pandemic eased, and because the war in Ukraine has threatened supplies from Russia. | This has risen sharply because demand for gas increased as the Covid pandemic eased, and because the war in Ukraine has threatened supplies from Russia. |
The price cap doesn't apply in Northern Ireland, but households there have also seen bills rise. | |
What's been the effect on customers? | What's been the effect on customers? |
There have been warnings that UK households are facing a "cost of living catastrophe". | There have been warnings that UK households are facing a "cost of living catastrophe". |
Fuel costs are one of the main factors which have driven the UK inflation rate up to 9% - its highest for 40 years. | Fuel costs are one of the main factors which have driven the UK inflation rate up to 9% - its highest for 40 years. |
Many people are expected to face "fuel poverty" - when a household has to spend a high proportion of its income on energy bills. | |
According to the National Energy Action (NEA) charity: "Millions will simply not be able to heat their homes [this winter]. We will see serious ill health and early deaths for those most susceptible to the cold." | |
What other help is available? | What other help is available? |
The government is doubling the Household Support Fund to £500m. This money is given to local authorities in England to support vulnerable families. | The government is doubling the Household Support Fund to £500m. This money is given to local authorities in England to support vulnerable families. |
Households in England have already been 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 have already been 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. |
However, the NEA told BBC News some of the poorest households in England and Wales had struggled to access the rebate. | |
English councils also have access to a "discretionary fund" to make extra payments, including to people living in other council tax bands. | |
In Northern Ireland the government has been given money to make payments, but political uncertainty there has meant the cash hasn't yet been released. | |
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 including the NEA, Citizens Advice, Turn2Us or the StepChange debt charity. | |
What can I do to save on fuel costs? | What can I do to save on fuel costs? |
Fuel providers are currently not generally trying to tempt new customers with cheap offers. Most 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 offset some of the rising energy costs. |
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