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What is the energy price cap and how high will bills go? What is the energy price cap and how high will bills go?
(1 day later)
UK households will find out how much their bills will rise when the new energy price cap is announced on Friday. Energy bills are set to rise sharply in October, when a new price cap takes effect.
The average annual bill for gas and electricity could reach £4,650 in January when the cap is next reviewed, according to analysts Cornwall Insight. With calls for more help with costs growing, plans to reduce bills for households using less energy at peak times are expected soon.
However, plans to reduce bills for households who use less energy during peak times are expected in early September. How high might bills go?
A new price cap will be announced by Ofgem, the energy regulator, on Friday.
It will determine how much 24 million households pay for their energy when it comes info force on 1 October.
The typical bill for direct debit customers could rise to £3,554 a year, according to analysts Cornwall Insight.
It says further increases could take bills to an average of £4,650 a year from January, when the cap is next updated.
However, Ofgem says predictions of future price cap levels should be treated with "extreme caution".
What is the energy price cap?What is the energy price cap?
The price cap is decided by Ofgem, the energy regulator, and is now reviewed every three months. The price cap is the maximum amount companies can charge households for each unit of energy they use (the kilowatt hour or kWh on your bills).
It doesn't limit your total bill, but sets the maximum price that energy companies can charge households on a standard variable tariff for each unit of energy they use. This is known as a kilowatt hour (kWh). It also limits what firms can charge customers for being connected to the grid, known as the standing charge.
Ofgem bases the cap on how much energy companies have to pay the firms which produce the electricity and gas they supply to customers. Ofgem sets it according to how much energy companies have to pay for the electricity and gas they supply to households.
It calculates how much a household which uses the average amount of energy will have to pay over a 12-month period - assuming they pay by direct debt. It calculates the annual bill for a household using a typical amount of energy. Before Friday's announcement that was £1,971 a year, or £2,017 for the 4.5 million households with a pre-payment meter, which are covered by a separate cap.
Households which use comparatively more energy will face higher bills, while those who use less pay less. However, the amount individuals actually pay could be higher or lower, depending on how much energy they use.
Customers who don't pay by direct debit or who use prepayment meters pay more for the energy they use. Ofgem now sets the energy price cap every three months and it applies in England, Scotland and Wales.
The price cap applies in England, Scotland and Wales.
Energy prices in Northern Ireland are controlled separately, but have also increased sharply.Energy prices in Northern Ireland are controlled separately, but have also increased sharply.
How high might bills go? Ofgem: Check if the energy price cap affects you
In April, Ofgem raised the price cap by an unprecedented 54% - meaning average bills rose to £1,971 a year from £1,277. The average bill for the 4.5 million people on prepayment meters rose £708 to £2,017 a year. How can I save money on my energy bills?
Bills for direct debit dual-fuel customers could go up to £3,554 when the price cap for October is announced, Cornwall Insight says. Plans to offer discounts to households which use less electricity at peak times, are expected in early September from National Grid, which runs the UK's electricity system.
It expects their average bill to increase again in January, to £4,650, or £388 a month, compared with the current £164 a month. Customers who don't use energy-hungry appliances between 17:00 and 20:00 BST would get money back for the energy they save during this time.
However, Ofgem has urged people to treat predictions of future price cap levels with "extreme caution". However, it's thought only households with smart meters will qualify and it can take a few weeks to get one installed.
How else can I save money?
National Grid, which runs the UK's electricity system, plans to offer discounts to households which use less electricity at peak times.
Under the scheme, which is due to be announced in early September, customers who don't use energy-hungry appliances between 17:00 and 20:00 BST would get rebates for every kilowatt hour (kWh) of energy they save during this time.
According to the Centre for Sustainable Energy, tumble dryers use between 2 and 3 kWh per hour they're on, while ovens use about 2 kWh and dishwashers between 1 and 1.5 kWh.
However, it's thought only households with smart meters will qualify for the scheme, and it can take a few weeks to get one installed.
The Energy Saving Trust says making several small changes to energy habits can also help reduce bills, such as limiting your shower time and air drying your clothes.The Energy Saving Trust says making several small changes to energy habits can also help reduce bills, such as limiting your shower time and air drying your clothes.
Why is the energy cap so high? According to the Centre for Sustainable Energy, tumble dryers use between 2 and 3 kWh per hour they're on, while ovens use about 2 kWh and dishwashers between 1 and 1.5 kWh.
Energy prices rose sharply when lockdown was lifted and the economy returned to normal. Boosting your home's insulation can also cut bills.
They have also increased because the war in Ukraine has reduced supplies of Russian gas. Why are energy prices so high?
Europe is getting 90% less gas from Russia than it was this time last year, according to David Fyfe, chief economist at Argus Media, which advises energy companies. Energy prices rose sharply when lockdown lifted and the economy began to return to normal.
They have also increased because the war in Ukraine has sharply reduced supplies of Russian gas.
This has pushed up the price of gas across the continent, including in the UK.This has pushed up the price of gas across the continent, including in the UK.
Gas and electricity producers raised their prices so rapidly in 2021 that many energy suppliers collapsed.Gas and electricity producers raised their prices so rapidly in 2021 that many energy suppliers collapsed.
Ofgem has been increasing the price cap to try and ensure the remainder stay in business.Ofgem has been increasing the price cap to try and ensure the remainder stay in business.
It says adjusting the price cap every three months, rather than every six months, will reduce instability.
What's the effect on customers?What's the effect on customers?
Fuel price rises are expected to pitch many people into fuel poverty. Further energy price rises are expected to put many people into fuel poverty, meaning they can't afford to heat (or cool) their homes to an adequate temperature.
Energy company E.on UK suggests one in eight households are currently struggling to pay their bills, and says 40% may be struggling by October. Energy company E.on UK suggests one in eight households are currently struggling to pay their bills. It says that could rise to 40% by October.
The NHS has warned that rising numbers of people will see their health worsen, unless the government takes further action to limit price rises. The NHS has warned that growing numbers of people will see their health worsen, unless the government takes further action to limit price increases.
The NHS Confederation said many people would have to choose between skipping meals or heating their homes. The NHS Confederation said many people will have to choose between skipping meals or heating their homes.
What help will I get to pay my energy bills?What help will I get to pay my energy bills?
All UK households will be given a one-off £400 discount on their fuel bills in October. All UK households will be given a one-off £400 discount on their fuel bills from October.
In addition, £650 will be paid to more than eight million low-income households who receive benefits or tax credits.In addition, £650 will be paid to more than eight million low-income households who receive benefits or tax credits.
There are further payments of £300 to pensioner households and £150 to individuals receiving disability benefits. There are further payments of £300 to pensioner households and £150 to disabled people.
Fifty disability charities have called on Tory leadership rivals Liz Truss and Rishi Sunak to promise more support
Vulnerable families can also claim help through the Household Support Fund, the Warm Home Discount scheme, and hardship funds run by energy companies.Vulnerable families can also claim help through the Household Support Fund, the Warm Home Discount scheme, and hardship funds run by energy companies.
How do I get the £400 energy grant and £650 cost-of-living payment?How do I get the £400 energy grant and £650 cost-of-living payment?
Three million households wait for £150 energy rebate
Ofgem: Getting help if you can't afford your energy billsOfgem: Getting help if you can't afford your energy bills
What happens if I don't pay my energy bills?What happens if I don't pay my energy bills?
Your supplier must give you a chance to clear your debt through an agreed payment plan.Your supplier must give you a chance to clear your debt through an agreed payment plan.
If you don't agree, you may be forced to move to a pre-payment meter.If you don't agree, you may be forced to move to a pre-payment meter.
In extreme cases, you might be threatened with disconnection.In extreme cases, you might be threatened with disconnection.
What can I do if I can't afford my energy bill?What can I do if I can't afford my energy bill?
How are you preparing for the rise in energy bills and cost of living? You can get in touch by emailing: haveyoursay@bbc.co.uk.How are you preparing for the rise in energy bills and cost of living? You can get in touch by emailing: haveyoursay@bbc.co.uk.
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