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What is the energy price cap and how high will bills go? | |
(4 days later) | |
This winter's increase in energy bills will be even sharper than predicted, according to the head of the regulator Ofgem. | |
The lower estimate was used by ministers when deciding how much financial support to offer households. | |
How high are bills going to go? | |
In May, Ofgem chief executive Jonathan Brearley said a typical household would pay £2,800 a year - an increase of £800 - from October. | |
October is when the energy price cap - the maximum price set by Ofgem which suppliers can charge customers in England, Scotland and Wales - is next up for review. | |
But Mr Brearley has now told MPs it is "clear" that "prices are looking higher than they did when we made that estimate". | |
He wouldn't be drawn on exactly how much prices will increase. | |
But one industry analyst has predicted a rise of more than £1,200 a year in October. Cornwall Insight said that the typical domestic customer was likely to pay £3,244 a year from October, then £3,363 a year from January. | |
The typical bill at present is about £2,000 a year, after the last price cap increase in April 2022. This is already £600 more than the average bill was in October 2021. | |
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 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 level 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. | 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. | 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 help am I getting to pay my energy bills? | |
All households in England, Wales and Scotland will be given a one-off £400 discount on their fuel bills in October. | |
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. | |
In addition, 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. | |
Disabled people will also receive £150 (plus the £650 payment if they also qualify for that). | |
And 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. | |
How do I get the £400 energy grant and £650 cost-of-living payment? | |
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 whose homes are in bands A-D should have already been given a £150 council tax rebate to cope with the rise in fuel prices. Similar schemes are in place in Wales and Scotland. | |
English councils also have access to a "discretionary fund" to make extra payments, including to people living in other council tax bands. | 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. | 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. | 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. | 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. | The Energy Saving Trust says several small changes could help offset some of the rising energy costs. |
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