Energy bills will rise to the highest level in three years for millions of households this winter after Ofgem announced its latest price cap. The cap is rising by 4% from October, just as many households will turn on their heating as temperatures start to fall.
The typical household that pays by direct debit will see their annual bill rise from £1,663 to £1,723. The increase comes despite a temporary VAT cut on electricity bills coming into effect, which has been offset by rising wholesale prices. Energy bills had already risen by 13% in July as uncertainty around the Iran war continues to drive up costs.
What is the Ofgem price cap?
You will be covered by the price cap if you are on a standard variable rate (SVR) tariff, which is your supplier's default plan if you have not fixed into an energy deal. Around 33 million households are on the price cap.
The price cap sets a maximum limit on how much you can be charged for each unit of gas and electricity you use, as well as the daily standing charge. The standing charge is a fixed fee you pay to be connected to the grid. The price cap does not put a total cap on how much you will pay for energy, so your bill is still based on how much gas and electricity you use. This means your bill can be higher or lower than the price cap figure.
The price cap figure represents the typical annual bill for someone who pays by direct debit, but it is actually reviewed every three months by Ofgem. It will next be updated in January. There are different unit rates and standing charges for prepayment customers, or if you pay when you get a bill.
How to cut your energy bill
There are plenty of simple things you can do around your home to cut your energy bill. Turning appliances off standby can save you around £45 a year, while not overfilling the kettle can save you another £10, according to the Energy Saving Trust. You can also reduce your bill by £26 a year by washing your clothes at 30C and reducing your washing machine use by one run per week for a year.
It could also pay you to get your home ready for winter. You can keep your home insulated on a budget by sealing up draughts, covering bare floors and bleeding your radiators so your heating works as efficiently as possible.
If you are worried about falling behind on your energy bill, speak to your supplier as soon as possible. They should be able to offer you support, such as a payment plan, payment breaks or affordable debt repayments. Your supplier may also have hardship funds that you could be entitled to. For example, the British Gas Energy Trust offers grants worth up to £1,700 to help people clear their debt, and it is possible to access this help even if you are not a British Gas customer.
There are also Government help schemes. The Warm Home Discount gives you £150 off your electricity bill if you are claiming certain means-tested benefits. Winter Fuel Payments are worth up to £300 and are paid to pensioners who have a taxable income of less than £35,000.
