Households across the country are facing tough times covering their energy bills, and will be relieved that the price cap will reduce again from July to £1,568 for a typical energy user.

Many providers have ceased trading amidst the energy crisis over the past couple of years. Bulb, which supplied 1.7m homes in the UK, has been bought by supplier Octopus Energy. Several smaller suppliers including Orbit Energy , Entice Energy, Goto.energy, Daligas, Pure Planet, Colorado Energy, Igloo Energy, Symbio Energy and Enstroga have gone into administration. Avro Energy, GreenSupplier Ltd, Utility Point, PfP Energy, MoneyPlus Energy and Together Energy have also failed.

Here, we explain why this crisis has arisen, what to do if your energy bills increase, and what government support may be available to help with heating costs this winter.

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Why are energy costs still high?

Energy bills are so high because the wholesale cost of gas rose dramatically in 2022.

A global shortage of gas pushed prices to an unprecedented level, with demand growing as economies opened up following the pandemic.

At the same time, gas production in some areas of the world fell due to issues that arose as a result of the pandemic, with Russia’s invasion of Ukraine also pushing costs up sharply. Prices have also been impacted by strong demand for liquified natural gas in Asia, which has reduced the amount that has reached Europe.

Fortunately, gas prices have recently fallen to their lowest level for two years, following a period of mild weather and an increase in the amount of gas storage in Europe to reduce dependence on Russian suppliers. However, according to analysts Cornwall Insight, bills could well jump again as we approach winter, with the price cap predicted to rise 12% on October 1, just as we head into winter.

What does this mean for my energy bills?

Energy bills are still high, with the price cap currently set at £1,690 a year for the average household.

Usually, if you’re approaching the end of a fixed rate tariff, you’d shop around and move to another competitive deal to keep costs down, but most suppliers have withdrawn most of their deals in recent months as they simply can’t afford to offer them. A small number of cheaper fixes are available at the moment, but they won’t save you much, so you might be better off waiting to see if a better deal comes along. Read more in our article Should I fix my energy prices?

For now, though, rolling onto your provider’s standard variable tariff is no longer the poor value option that it used to be, as at least you’ll have peace of mind that the cost of your bills won’t rise higher than the price cap.

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.

If you think you’re going to struggle to cover costs, talk to your supplier as soon as possible. They often have support schemes available to help those on the lowest incomes, or may be able to negotiate a repayment scheme that’s affordable.

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How have energy prices affected the energy price cap?

The energy price cap limits how much suppliers can charge consumers for their energy usage. The cap is set by Ofgem, who review and update it every three months (previously every six months) to reflect factors like wholesale energy prices and distribution cost.

The price cap is currently set at £1,690 a year for the average household, and will fall to £1,528 in April. The average unit price for dual fuel customers paying by direct debit is currently limited to 24.5p/kWh for electricity and 6.04p/kWh for gas, including VAT.

The actual amount you’ll pay will depend on how much energy you use, so those living in bigger homes or properties that aren’t energy efficient could pay much more than the cap per year, whilst those using less energy will have lower bills.

Find out more about how the price cap works in our guide What is the energy price cap?

What if my energy provider goes bust?

Don’t panic if you hear your energy provider does stop trading. Under the energy regulator Ofgem’s safety net, your energy supplies will continue uninterrupted. If your account is in credit, then your balance is protected and you will not lose the money that is owed to you.

Ofgem will choose a new supplier for you and whilst it is doing this, so do not switch in the meantime. You will be updated when a new supplier is chosen and that supplier will then get in touch about your new tariff. At this point, ask to be put on their cheapest tariff, or shop around for a better deal from another supplier. You won’t be charged any exit fees for switching away from your new supplier. Find out more in our guide What happens if my energy supplier stops trading?

Can I get help with my heating costs?

If you’re struggling to heat your home this winter because you can’t afford your energy bills, it’s worth checking whether you may be eligible for some financial support. The Winter Fuel Allowance usually provides between £100 and £300 to help pay your bills, with the amount depending on how old you are and who else is in your household.

If you’re not eligible for the Winter Fuel payment, you might be able to get money off your energy bills this winter under the Warm Home Discount Scheme. This is a one-off discount on your electricity bill, paid directly to your energy provider on your behalf between October and March. The scheme will reopen in October.

You may be eligible if you:

  • are receiving the Guarantee Credit element of Pension Credit and your electricity supplier is part of the Warm Homes Discount scheme. In this case, you should get £140 automatically deducted from your bill between September and March.

  • are on a low income, already receive certain means-tested benefits and your electricity supplier is part of the Warm Homes Discount scheme. If you think you might be eligible, contact your electricity supplier in the first instance and they will be able to give you more details and confirm if you are eligible.

  • are on a pre-pay or pay as you go electric meter. You will need to speak to your electricity provider to find out how to activate your deduction.

Find out more about help you might be able to claim for in our guide Are you eligible for help with heating costs?

If you’ve explored all of these options and are still struggling, your council may offer a local welfare scheme for families and individuals who are struggling to meet basic costs. The Household Support Fund is provided by the government to councils for this purpose. Contact your local council to see if you might be available for support. You can read more about this in our article The Household Support Fund Explained.

If you’re struggling with energy debt, you might be able to apply to your supplier for support. Find out more in our article Is your energy supplier offering grants to pay off energy debts?

Are there any other ways I can keep energy bills down?

Making your home as energy efficient as possible can help reduce your energy costs as well as your carbon footprint.

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.

It’s also worth checking how long you heat your water for each day. Many people have their hot water on for much longer than they need, bumping up their energy costs. Hot water cylinders usually hold the heat for hours, so you should only need to heat your water for an hour in the morning and an hour in the evening to ensure that you have plenty of hot water when you need it.

If your home is poorly insulated or doesn’t have a working central heating system, there may be improvements that can be made to your home via insulation and heating schemes which provide funding to make properties more energy efficient.
You can use the links below to find out more about schemes that may be available to you depending on where you live:

Learn about other ways to keep your energy costs down in our guide Save money on your energy bills.

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