With the energy price cap rising by 2 per cent from October for a typical household, many families will be considering the impact on their finances.
Now, a new online calculator has revealed by how much people in England, Wales and Scotland can expect their bill to rise if they are not currently on a fixed tariff.
The upcoming increase means a household using a typical amount of gas and electricity will now pay £1,755 a year, which is a rise of £35 a year on the current rate.
The Daily Mail’s widget built by AI money-saving tool Nous.co predicts an annual bill from October based on current usage and price cap forecasts for the next year.
The price cap sets a maximum price that suppliers can charge consumers for each kilowatt hour (kWh) of energy they use and is renewed every three months.
The figures provided by Ofgem indicate what a household using gas and electricity, and paying by direct debit, can expect to pay if their energy consumption is typical.
But it does not limit a home’s total bills because people still pay for the energy they use – so if it is above the average they pay more, and if it is below they pay less.
The change will impact the bills of the 35million households currently on a variable rate for their gas and electricity as they continue to battle the cost of living crisis.
Household finance expert Greg Marsh, CEO of Nous, said: ‘For anyone on a variable tariff, energy bills are going to rise just as we go into the colder winter months.
‘At the same time, energy debt is at record levels, with households typically owing more than £1,000. With prices still at such high levels its crucial people aren’t paying too much. Fortunately, most of us can save if we’re smart about it.’
Ofgem said today that the rise came despite wholesale prices being currently ‘stable’, having fallen by 2 per cent over the past three months.
Standing charges – the figure consumers pay per day to have energy supplied to their homes – are set to rise by 4 per cent for electricity and 14 per cent for gas, or 7p a day, primarily driven by the Government’s expansion of the Warm Home Discount.
Around 2.7 million more low-income households, including 900,000 families with children, are eligible for the £150 Warm Home Discount this winter, after the Government confirmed it would remove the ‘hard to heat’ eligibility criteria.
The Government has said that the change will see an estimated 6.1million households receive the discount this winter.
Ofgem said the latest increase was also driven by an increase in electricity ‘balancing costs’ – incurred by network operators to ensure a stable electricity supply for when there is both too much power and too little power in the system – adding around £1.23 a month to the average household bill.
Balancing costs relate to the extra expense of paying wind farms in remote areas to turn themselves off because the network cannot take their power to where it is required.
This can also mean other generators such as gas plants which are closer to consumers are then paid millions of pounds to fire up to replace them.
Ofgem also warned that unpredictable global events meant prices remained volatile and were likely to change, although analysts Cornwall Insight have forecast a ‘small’ decrease to the price cap from January.
Ned Hammond, deputy director of customer policy at Energy UK, which represents the industry, said: ‘While it is usually movements in wholesale energy costs that affect the price cap’s level, on this occasion one of the factors behind the rise is the expansion of the Warm Home Discount to an extra 2.7 million households.
Four top tips for saving money on your energy bills this autumn
By GREG MARSH
Take a meter reading on September 30: Ofgem’s energy price cap increases on October 1. If you don’t have a smart meter, make sure you take a manual reading just before then so you aren’t charged for extra energy under the new higher rates.
Make sure your smart meter isn’t in dumb mode: Millions of smart meters in Britain aren’t working, meaning people are being charged based on estimated usage. This can lead to overpaying by hundreds. If readings on your bill are marked ‘e’, they’re estimates and could be wrong. You should submit regular manual readings if this is the case.
Don’t ditch your direct debit: If you discover your direct debit is too low or too high, don’t ditch it entirely – it’s the cheapest method of paying for energy. Customers who pay by standard credit currently pay around £100 per year more than direct debit customers.
Save £100s if you’re on a variable tariff: The majority of households are on a variable deal and can save by switching to a good-value fix.
GREG MARSH is chief executive of AI money-saving tool Nous.co
‘At a time when customer debt is at a record £4 billion plus and many are still struggling with bills hundreds of pounds higher than at the start of 2022, the extra support this will provide is much needed.
‘However, the Government does need to look at a fairer way of targeting support.
Gillian Cooper, director of energy at Citizens Advice, said: ‘Today’s announcement means the price cap will remain drastically higher than before the energy crisis. With millions of households already in debt as the colder months draw in, this news offers no comfort.
‘The Government has made welcome changes to expand the number of people who’ll receive support with their energy bills this winter, but it’s not enough to turn the tide. Our advisers are bracing for more calls as people struggle to top up their meters and pay the gas bill.
‘It’s high time for decisions about the longer term. The Government must set out plans for how it will support the households struggling the most over the coming years and also prioritise investing in energy upgrades for millions of homes, to reduce costs and keep money in people’s pockets.’
The End Fuel Poverty Coalition said the latest increase represented a 2.21 per cent year-on-year rise and meant energy bills would be 68 per cent or £713 a year higher than in the winter of 2020-21.
Simon Francis, coordinator of the End Fuel Poverty Coalition, said: ‘Among the hardest hit by the planned price cap rise will be the 12 million households already in fuel poverty.
‘Hidden in the detail of the announcement is a 14 per cent increase in gas standing charges while gas unit rates remain almost double pre-crisis levels. And the cost of electricity is also up, which is itself set by the cost of the most expensive generator, usually gas-fired power stations.
‘Given that wind and solar are far cheaper ways of generating power and North Sea gas reserves are unable to meet domestic heating needs from 2027, it’s time for action.’
Energy minister Michael Shanks said: ‘We know that any price rise is a concern for families.
‘Wholesale gas prices remain 75 per cent above their levels before Russia invaded Ukraine. That is the fossil fuel penalty being paid by families, businesses and our economy.
‘That is why the only answer for Britain is this Government’s mission to get us off the rollercoaster of fossil fuel prices and onto clean, homegrown power we control, to bring down bills for good.
‘At the same time, we are determined to take urgent action to support vulnerable families this winter. That includes expanding the £150 warm home discount to 2.7 million more households and stepping up our overhaul of the energy system to increase protections for customers.’