The energy price cap will rise from £1,717 to £1,738 with effect from January 1, heaping yet more financial pressure on countless already stretched households.
The price cap, which was introduced by the energy regulator Ofgem in 2018, limits what a supplier can charge on their standard variable, or default, tariff. The cap is based on the price per kWh of electricity and gas that can be charged. It isn’t, however, a limit on total bills, as these depend on your usage, so those who live in large properties or who consume a large amount of energy could see annual bills much higher than £1,738, while those in smaller homes could pay less.
A fall in wholesale prices led to a fall in the energy price cap for July to September, but two increases in October and January are a real worry for most people, and especially for millions of pensioners who no longer qualify for the Winter Fuel Payment this winter if they aren’t claiming benefits.
The latest increase is due to the ongoing war between Russia and Ukraine and higher demand for electricity driven by extreme weather. This has caused steeper wholesale energy prices, driving up costs for both suppliers and customers.
If you’re worried about energy prices, read our article The energy bills crisis: what can you do about soaring costs?
Here, we explain what the price cap means for you and what you can do to keep energy costs down.
What is the government doing to help?
Government support with energy bills ended in April 2023, meaning many people are likely to struggle to make ends meet. According to National Debtline, 38% of UK adults (an estimated 20.6 million people) are concerned about affording their energy bills this winter, with 6.7 million (12 percent) planning to reduce the number of baths and showers they take to afford rising energy costs.
Steve Vaid, chief executive of the Money Advice Trust, the charity that runs National Debtline, said: “Despite the colder months, millions of people are set to cut back on their energy usage this winter due to high costs. And with energy arrears at record levels, this further rise in the energy price cap will heap more pressure on households whose budgets are at breaking point.
“Urgent support is needed to help people already struggling to keep the heating on this winter. A Help to Repay scheme, providing repayment matching and debt write off options is needed to help hundreds of thousands of households currently trapped in energy debt.
“Anyone struggling with their energy bills, or worried about their finances, should contact National Debtline as soon as possible – our advisers can help.”
What help can I get with energy bills?
You may be eligible for a £150 discount off your energy bills under the Warm Home Discount scheme, if your supplier belongs to it and you are receiving the Guarantee Credit element of Pension Credit, or you’re on a low income and receive certain means-tested benefits.
To check which energy suppliers offer the discount, you can visit GOV.UK.
During periods of particularly cold weather, you may be eligible for Cold Weather Payments of £25 if you’re claiming certain benefits such as Pension Credit. These are made when your local temperature is recorded as (or forecast to be), an average of zero degrees celsius or below for at least seven consecutive days between 1 November and 31 March every year.
You should receive these payments automatically, so there’s no need to apply.
If your home is badly insulated, you might qualify for help to make improvements that will make it more energy efficient and keep you warmer. You can use the links below to find out more about schemes that may be available to you depending on where you live:
How can I reduce my energy costs?
Making a few simple changes around your home could help reduce your energy bills.
For example, according to the Energy Saving Trust, you can save around £35 a year just by remembering to turn your appliances off standby mode, whilst cutting back your washing machine use by just one cycle per week can save you £8 a year on energy.
Similarly, hanging up your wet clothes to dry rather than using a tumble dryer is an easy way to reduce your energy consumption and could save you up to £70 per year, according to Ovo Energy.
Learn more in our article Energy saving tips: how to reduce your bills.
If you’re currently on your energy provider’s standard or default tariff, it’s worth checking whether you might be able to switch to a cheaper deal. Default tariffs are usually suppliers’ most expensive tariffs and in the past many energy customers have been able to save hundreds of pounds by switching to a cheaper fixed rate deal. However, soaring global energy costs have meant that suppliers have been unable to offer deals that are significantly lower than the price cap.
At present, there are growing numbers of fixed rate tariffs that are available to new and existing customers, so it’s worth checking whether you might be able to move to a cheaper deal.
Gareth Kloet, spokesman for Go.Compare Energy, said: “The energy market has warmed up in the last year, and there are options out there when it comes to switching providers which could potentially help you save some money. If you are currently on a flexible tariff, then now is the time to take a look at some of the fixed-rate deals on the market – there are a variety of suppliers with deals at the moment which could help soften the blow of this price rise.
“For those on a fixed tariff already, you can still opt to switch to another provider, but it is worth bearing in mind that your current provider likely has exit fees which you will have to pay – and these could cancel out any savings you might make by switching. So, before making any hasty decisions, take a look at your current tariff as well as your average energy usage, and head to a comparison website to find out which options are available to you.
“Whether you switch or not, it’s important to take a meter reading as close to the 1st of January as possible, to make sure you are charged for the right amount of energy at the right price. Even if you have a smart meter, taking a manual reading monthly is a good way to make sure your energy usage is being captured correctly.”
If you’re considering switching your energy provider, it’s worth doing plenty of research so you can be certain you’ve found the best possible deal to suit your needs. Comparison websites such as MoneySuperMarket, Uswitch and Compare the Market enable you to compare the latest energy tariffs, whether you’re looking for a fixed or variable deal.
What if I can’t pay my bills?
If you’re finding it impossible to cover your energy costs, get in touch with your supplier as soon as you can and explain that you’re having financial problems. They are obliged to give you advice on how to pay back the money you owe and should suggest a repayment plan that will still leave you enough money to live on. If you’re struggling with energy debt, your supplier might be able to offer a grant to help repay this. Find out more in our article Is your energy supplier offering grants to pay off energy debts?
Don’t worry that a missed energy bill will be followed by disconnection – it won’t.
You may be told by your energy provider that your gas and electricity supply could be disconnected if you haven’t paid a debt after 28 days of being notified. However, usually your supplier will offer a variety of options to repay your debt, rather than disconnect you, such as a repayment plan or prepayment meter.
Find out more in our guide What can you do if you can’t pay your energy bills?
Where to find advice
Working out how you’ll cover energy bills can feel overwhelming, and if you are struggling it’s a good idea to seek professional advice as soon as possible.
There are plenty of free sources of advice available and many charities and organisations can help you negotiate debt repayment plans with your creditors on your behalf. These include:
- Citizens Advice – 0800 144 8848 (England) 0800 702 2020 (Wales)
- StepChange – 0800 138 1111
- National Debtline – 0808 808 4000
- PayPlan – 0800 280 2816
Whatever happens, don’t suffer in silence, as struggling with debts on your own can take a real toll on your mental health. If you are finding it hard to cope, our article Are money worries affecting your mental health? explains where to go for help if you need someone to talk to.
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