The UK energy industry is in disarray. In principle, we should benefit from competition, but there hasn't been any — instead, high prices are essentially mandated by regulations.
However, there are opportunities to act to help, not because there are excellent deals available, but rather because the most recent analysis indicates that the future appears to be substantially worse. Future price cap forecasts are now far greater than they were even a few months ago as they continue to grow. This indicates that certain exorbitantly expensive fixes appear to be working.
Here is what you need to know...
From 1st October, a new ‘Energy Price Guarantee’ will mean an average of £2,500 a year on energy for the next two years.
According to the official Goverment site “Prime Minister Liz Truss sets out decisive action to support people and businesses with their energy bills and tackle the root causes of the issues in the UK energy market through increased supply – ensuring the country is not left in the same position again.”
“Under new plans, a typical UK household will pay no more than £2,500 a year on their energy bill for the next two years from 1st October, through a new Energy Price Guarantee which limits the price suppliers can charge customers for units of gas. This takes account of temporarily removing green levies, worth around £150, from household bills. The guarantee will supersede the existing energy price cap.”
It is actually a cap on standing charges and unit rates
In real terms, the price cap restricts the amount of standing (daily) charges that businesses can impose, as well as the price you pay for each unit of energy consumed. While the calc's easiest for most, I know some like to see the actual rates. Here are the typical direct debit rates for the period of 1 October to 31 December.
Electricity: Standing charge 46.4p/day (currently 45.3p)Unit rate 51.9p/kWh (currently 28.3p)
Gas: Standing charge 28.5p/day (currently 27.2p)Unit rate 14.8p/kWh (currently 7.4p)
You will pay £273 per year even if you use no energy
The daily standing fees that you pay just for having a bill jumped significantly in April and did so again this month. The average price cap standing charge for gas and electricity is £273 per year before you use anything.
On 1 Jan, the price cap could rise another 50%
The primary variable in the calculation used by Ofgem to determine the price cap is the publicly known year-ahead wholesale energy rates. This is why the forecasts near to announcement dates are very accurate.
The first price cap to only last three months will be in effect in October. We appealed, again with little effect, when Ofgem cut it from altering six times per year to assist protect retail energy firms.
Direct debit is still the cheapest way to pay
The price cap is determined by the mode of payment. The new average price cap rates for someone using ordinary usage are listed below.
Direct debit: Up 80% from £1,971 to £3,549/yr
Prepayment: Up 79% from £2,017 to £3,608/yr
On receipt of bills: Up 79% from £2,100 to £3,764/yr
Can you reduce your energy usage?
Naturally, reducing consumption lowers costs, and ideally, you can reduce consumption while maintaining a reasonable standard of living.
- Begin with energy-saving suggestions.
- Include the Energy myth-busting guide for less straightforward problems.
- Really having trouble? Consult our article, Heat the Human, Not the House.
Suppliers will knock £400 off every energy bill over the next six months
The government announced a non-repayable subsidy to cover electricity costs in May. The award will be provided at a rate of around £66 per month from October to March. Electricity bills are used because they are more widely used than gas bills.
Some will receive the funds immediately into their bank accounts, while others will have their direct debits scaled back. Those who use prepayment metres will also receive vouchers.
If you have any questions, feel free to get in touch today!