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Millions braced as energy price rise to be revealed Millions braced as energy price rise to be revealed
(about 4 hours later)
Millions of people facing a spike in energy costs will find out shortly how much more they will have to pay.Millions of people facing a spike in energy costs will find out shortly how much more they will have to pay.
Ofgem's new price cap is likely to add hundreds of pounds onto the annual bill for 22 million homes - a key factor in the rising cost of living. The energy regulator's new price cap - the maximum amount suppliers can charge customers for each unit of energy - is likely to add hundreds of pounds onto the annual bill for 22 million homes.
The regulator's new cap for England, Wales and Scotland, to be announced at 11:00 GMT, will take effect in April. Ofgem's new cap for England, Wales and Scotland will take effect in April.
Ministers are reported to have plans to provide loans for energy firms to help them cut money from customers' bills.Ministers are reported to have plans to provide loans for energy firms to help them cut money from customers' bills.
Analysts Cornwall Insight expect a typical household to face an annual increase of more than £600 on their energy bill, with a further increase of as much as £400 to come in the winter after the next cap is set in six months' time. Details of the new cap are due to be announced at 11:00 GMT.
Among those braced for the squeeze on their finances is 24-year-old Michael Ball, from Kirkcaldy. A typical household will face an annual increase of more than £600 on their energy bill, with a further increase of as much as £400 to come in the winter after the next cap is set in six months' time, analysts at Cornwall Insight have said.
His biggest worry is that a significant rise could mean he would no longer be able to afford the rent on his one-bedroom flat, and would have to move back in with his parents. The cost of living in general is forecast to rise further this year, and the Bank of England will also announce on Thursday whether it will increase interest rates to combat rising prices.
There are also planned tax rises in April, with Prime Minister Boris Johnson under intense pressure to scrap an increase in National Insurance. But he, and Chancellor Rishi Sunak, said at the weekend the tax rise would go ahead.
Michael Ball says he is anxious about the price riseMichael Ball says he is anxious about the price rise
Among those braced for the squeeze on their finances is 24-year-old Michael Ball, from Kirkcaldy.
His biggest worry is that a significant rise in energy prices could mean he would no longer be able to afford the rent on his one-bedroom flat, and would have to move back in with his parents.
"Anything over a 30% rise in April would make me leave this flat. I'm already spending more than my rent on energy," he said."Anything over a 30% rise in April would make me leave this flat. I'm already spending more than my rent on energy," he said.
He said he was "very anxious" about the rise, and expected it to be a "big challenge".He said he was "very anxious" about the rise, and expected it to be a "big challenge".
How the cap worksHow the cap works
The cap, which is announced every six months, sets the prices that suppliers can charge for each unit of energy as well as the standing charge.The cap, which is announced every six months, sets the prices that suppliers can charge for each unit of energy as well as the standing charge.
This is then translated into the expected annual bill for a household that uses the typical amount of gas and electricity.This is then translated into the expected annual bill for a household that uses the typical amount of gas and electricity.
At present, that is £1,277, but analysts are predicting a 50% rise from April.At present, that is £1,277, but analysts are predicting a 50% rise from April.
That does not mean there is a limit to how much people can pay. The more gas and electricity that is used, the higher the bill.That does not mean there is a limit to how much people can pay. The more gas and electricity that is used, the higher the bill.
What's the energy price cap and why is it going up?What's the energy price cap and why is it going up?
Anyone who is on a standard variable tariff, whose fixed deal has come to an end (or is about to), and those moved because their old supplier went bust will be affected by the new higher cap.Anyone who is on a standard variable tariff, whose fixed deal has come to an end (or is about to), and those moved because their old supplier went bust will be affected by the new higher cap.
There is a separate cap for 4.5 million people on prepayment meters. It means a household using a typical amount of gas and electricity pays £1,309 a year.There is a separate cap for 4.5 million people on prepayment meters. It means a household using a typical amount of gas and electricity pays £1,309 a year.
Energy firms are struggling under the weight of surging wholesale gas prices. The new cap will allow them to pass some of that cost onto customers.Energy firms are struggling under the weight of surging wholesale gas prices. The new cap will allow them to pass some of that cost onto customers.
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Why are UK energy prices so high?Why are UK energy prices so high?
Joe Malinowski, founder of energy price comparison website The Energy Shop, said: "The energy price cap has already bankrupted over half of all energy suppliers in the market. Now it is set to bankrupt the consumer.Joe Malinowski, founder of energy price comparison website The Energy Shop, said: "The energy price cap has already bankrupted over half of all energy suppliers in the market. Now it is set to bankrupt the consumer.
"Come 1 April, energy households up and down the country are set to get battered by colossal increases in energy bills. For many, if not most, it will be simply unaffordable.""Come 1 April, energy households up and down the country are set to get battered by colossal increases in energy bills. For many, if not most, it will be simply unaffordable."
However, ministers are expected to announce a package of measures to reduce the immediate impact on households.However, ministers are expected to announce a package of measures to reduce the immediate impact on households.
The plans are expected to include the Treasury's "rebate and clawback" scheme, which would involve providing around £5-6bn in loans to energy firms to enable them to lower bills from April - possibly by about £200.The plans are expected to include the Treasury's "rebate and clawback" scheme, which would involve providing around £5-6bn in loans to energy firms to enable them to lower bills from April - possibly by about £200.
But it has raised concerns among providers because the money would still have to be paid back eventually by billpayers.But it has raised concerns among providers because the money would still have to be paid back eventually by billpayers.
The cost of living is forecast to rise further this year, and the Bank of England will also announce on Thursday whether it will increase interest rates to combat rising prices. Nigel Pocklington, chief executive of renewable energy supplier Good Energy, said there was "a lot unexplained" about the government's proposal, but added a £200 rebate would "help" households.
There are also planned tax rises in April, with Prime Minister Boris Johnson under intense pressure to scrap an increase in National Insurance. But he, and Chancellor Rishi Sunak, said at the weekend the tax rise would go ahead. He told the BBC's Today programme: "It looks to be quite a complex and perhaps a slightly rushed proposal in that there's all sorts of open questions around what happens if a customer leaves you and you have borrowed money to smooth their bill?
"What happens if a customer is already on a low tariff? Do we cut that even lower?"
Meanwhile, the managing director of supermarket chain Iceland, Richard Walker, said he was concerned that "bricks and mortar" retailers and businesses were "going to bare the brunt" of rising energy prices.
"I think it's safe to say 2022 is probably set to be the hardest year ever for many UK families," he added.
"We are talking about energy prices and costs directly affecting consumers but that is also going to have a huge knock on effect for businesses too. In terms of grocery retail, every supermarket will be raising its prices."
INFLATION: Why prices are rising so quicklyINFLATION: Why prices are rising so quickly
PETROL: Are we paying too much at the pump?PETROL: Are we paying too much at the pump?
GAS PRICES: How can I protect myself from rising prices?GAS PRICES: How can I protect myself from rising prices?
IMPACT: 'I'm so cold it feels like I'm sleeping outside'IMPACT: 'I'm so cold it feels like I'm sleeping outside'
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