- Energy crisis
- Home energy tips
This blog was written in August 2022. Since 1 July 2023, energy prices have been set by Ofgem’s price cap. For annual energy bills for a typical household see our page on how to save money on your bills.
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Theenergy price capis set by Ofgem, and it limits the maximum amount energy suppliers can charge you for each unit of energy you use if you live in England, Scotland and Wales.
The cap was due to rise again by 80% from 1 October 2022 for 24 million people. But, the UK Government has now frozen typical energy bills at £2,500 from October for the next two years under the Energy Price Guarantee scheme. This is almost £1,000 less than typical bills would have risen to under the cap, but this will still be more than the price cap of £1,971 set in April.
Your bills might be higher or lower than this if you use more or less energy than the typical household.
Our energy expert and head of policy, Stew Horne, answers the questions everyone’s asking about their energy bills right now.
What has caused this energy crisis?
Why have energy bills gone up?
This is largely due to an increase in wholesale gas prices, caused by higher demand for gas after Covid-19 restrictions relaxed, but also because of Russia’s invasion of Ukraine, which has threatened supplies and driven up prices.
Russia is one of the world’s largest producers of oil and gas, supplying the EU with 40% of its gas in 2021.
When will my energy bills go down?
Some estimates suggest that energy bills could remain high until 2024. It’s difficult to know exactly when energy bills will go down, as international gas prices are continuing to fluctuate.
Is the UK being hit harder than other European countries?
The UK is not the only country in Europe struggling with skyrocketingenergy prices. Unlike the UK, the rest of Europe gets significantly more gas from Russia and is therefore more at risk of reduced energy supplies.
The UK does appear to be impacted harder than our European neighbours; the average energy price increase in the 12 months to March 2022 for the EU was 41%, while the UK price cap increased by 58% over the same period.
How might energy bills come down?
What could the UK Government do to support people now?
Though it will be difficult for the UK Government to tackle the root causes of high energy bills, it must step in now to ease the pain of high bills for consumers.
It can do this in several ways, such as further support payments to reflect higher bills (potentially paid for with further windfall taxes on the high profits of oil and gas companies), temporarily cutting VAT on energy bills, an ‘energy furlough scheme’, or temporary renationalisation of energy companies that cannot offer bill reductions.
It’s also essential that the government works to reduce the energy used in our homes by supporting a national programme of energy efficient retrofit.
What about a windfall tax on the big companies that produce our oil and gas?
The previously announced windfall tax on energy producers will help to cover the £400 discount on energy bills for households. It’s also being used to help eight million low-income households, who will receive a one-off payment of £650, as well as increased support for pensioners this winter and a one-off payment of £150 for those with disabilities.
However, since the windfall tax was announced, price cap estimates have increased dramatically,as have the predictions for future energy company profits to £170bn over the next two years, so the money raised from the tax is now being seen as not enough to help households with rising costs.
The government could increase the windfall tax on these companies in the future to give more support to households.
What is the ‘green levy’ on energy bills?
‘Green’ levies refer to the social and environmental policy costs that make up part of our energy bills. These policies either support investment in renewable energy, help with social issues such as fuel poverty, or both. For example, the Energy Company Obligation, which supports insulating homes to cut bills, is funded by green levies.
It is vital the programmes these levies support are not scrapped completely, as they play an important role in supporting vulnerable households by delivering energy efficiency measures and investing in renewable energy.
The UK Government’s recent announcement made clear that these levies would be removed ‘temporarily’, with the cost of these important programmes met by the Treasury for the time being.
Will cutting VAT on energy bills help to bring down costs?
While temporarily cutting VAT on energy bills would take some much-needed pressure off bills, it will not be enough on its own to help all households. A much wider package of support is needed.
The government’s recent energy price freeze at £2,500 does help to mitigate further price rises, but there are still questions about how some households (eg those off the gas grid) will be supported. With average prices frozen at £2,500, this will still leave many thousands of households in fuel poverty.
Are energy suppliers charging us more for our bills just because they can?
No, the wholesale price of gas on the global market is driving the price rise.
What’s the long-term solution to this crisis?
The best way the government can bring bills down is to reduce our reliance on fossil fuels.
We’re calling for them to invest more in renewable energy, which is significantly cheaper than gas, and provide nationwide support to insulate our homes.
What about the October energy price cap?
Should I submit a meter reading before the new October price cap comes into place?
We advise you to submit an up-to-date meter reading as soon as possible and submit meter readings regularly to make sure you’re only paying for what you use.
While the UK Government’s new price guarantee sets a lower cap (£2,500 for the average household) than the price cap Ofgem announced, which was due to come in in October (£3,549), this is still higher than the current price cap.
So, until October 1, the price of energy you use per unit will still be in line with the current price cap. It’s worth taking a meter reading before the increase comes into effect as you will likely see increases to your energy bills.
If you don’t submit a meter reading, your energy provider will estimate how much energy you’ve been using. This means that you could be charged at the higher rate for energy used before the price cap came in, even if you’ve cut your energy consumption.
I’ve heard that the energy suppliers might put up direct debits before the next price cap kicks in on 1 October. Is that true?
This is possible. The amount you pay by direct debit is reviewed periodically by your energy company, which considers factors such as estimated usage, your current tariff, debit/credit balances and recent meter reads. It is therefore possible that some customers’ direct debits will change before October, even after the UK Government’s energy price guarantee has come into effect.
What support is there for paying energy bills?
What support is available to help me pay my energy bill?
If you need help now to pay your energy bills, it’s vital you contact your energy supplier immediately.
All households will get £400 off their bills from October, with monthly payments over six months from October 2022 to March 2023 and more vulnerable households receiving additional payments.
Our top tips could also help yousave up to £564 a year on your billsand there’s additional help available, wherever you are in the UK.
I live in Northern Ireland. Will I get the £400 discount on my energy bill and benefit from the newly announced price freeze?
The UK Government is working to ensure that people in Northern Ireland receive equivalent support as soon as possible, and at the same time as the rest of the UK.
I live in rented accommodation and my rent includes all my bills. Will I receive the £400 support payment?
If your rented accommodation has an electricity connection and your energy bills are included in your rent, such as the case for many student houses, your landlord should pass on the £400 discount to you.
There are rules in place that can protect tenants and make sure they receive this discount. If you want to find out more, Ofgem’s guidance can help.
What happens if I can’t pay my energy bill?
We know that many people will be worried about paying their energy bills.
Citizens Advice advises people struggling to pay to contact their supplier immediately to discuss ways to pay. Your supplier must legally help you come to a solution. For example, they could set you up on a payment plan that you can afford.
What happens if I stop paying my bills in protest?
Charities have warned not paying energy bills can have very serious consequences, and risks households being disconnected and damaging their credit rating.
What are the top five things I can do right now?
- Make small changes at home. They won’t cost you anything but could save you up to £564 a year on your bills.
- Read this blog to find out how you’ll get £400 off your energy bills from October.
- If you’re struggling to pay your energy bills now, find out if you’re eligible for any financial support.
- Take a meter reading before 1 October to make sure your bills are as accurate as possible when the new price cap comes into force.
- Sign up to our newsletter and get more tips to reduce your energy bills.
What’s going to happen this winter?
Could my energy bill really go up to over £5,000 next year?
According to the most recent estimate from analysts Cornwall Insight, energy bills could reach over £5,000 next year. Although, Ofgem recently said that it’s too early to predict how high energy bills could go in 2023, adding that the latest forecast has ‘limited value’. In any case, the UK Government’s recent announcement of an energy price freeze of £2,500 for the average household means that people will not have to pay these high energy costs through their bills as the difference will be met with government borrowing.
Will there be blackouts this winter?
Under the UK Government’s latest ‘worst case scenario’ outlook, the UK might experience blackouts in January if cold weather is combined with gas shortages to leave the country short of power.
However, it’s important to stress that this is unlikely.
