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What Does The New Price Cap Mean For You?

What financial aid maybe available to you to help with the increased energy costs?
Today (26 August 2022), Ofgem has announced the energy price cap will increase to £3,549 per year for dual fuel for an average household from 1 October 2022.

This comes as Ofgem’s CEO warns of the hardship energy prices will cause this winter and urges the incoming Prime Minister and new cabinet to provide an additional and urgent response to continued surging energy prices.

On the 1st January. 2023, the prediction is that prices will increase 51%, taking it to £5,386.

The increase reflects the continued rise in global wholesale gas prices, which began to surge as the world unlocked from the Covid pandemic and have been driven still higher to record levels by Russia slowly switching off gas supplies to Europe.

As set out in law, the price cap puts a maximum per unit price on energy that reflects what it costs to buy energy on the wholesale market and supply it to our homes. It also sets a strict and modest profit rate that suppliers can make from domestic energy sales. However, unlike energy producers and extractors, most domestic suppliers are currently not making a profit.

The price cap protects against the so-called ‘loyalty premium’ where customers who do not move suppliers or switch to better deals can end up paying far more than others. Ultimately, the price cap cannot be set below the true cost of buying and supplying energy to our homes, so the rising energy costs are reflected in it.

Although Ofgem is not giving price cap projections for January because the market remains too volatile, the market for gas in Winter means that prices could get significantly worse through 2023.

What does this mean for your bills?

The price cap means that the unit rates for your gas and electric will change, as will your standing charges. Below is the price cap guide, courtesy of Money Saving Expert, which will give you a guide on the new prices:

Money Saving Expert also has a really useful price calculator which you can use to get a prediction of your new costs from October this year:

Martin Lewis has predicted that these new rates, based on average use, will be as below :

Direct Debit: Up 80% (up from £1,971 to £3,549/yr)

Prepayment: Up 79% (up from £2,017 to £3,608)

On receipt of bill: Up 79% (up from £2,100 to £3,764)

It's with remembering that there is no actual cap on the maximum you will pay for your energy; what's capped is standing charges and unit rates; energy usage will continue to be billed with no limit!

Jonathan Brearley, CEO of Ofgem, said:

“We know the massive impact this price cap increase will have on households across Britain and the difficult decisions consumers will now have to make. I talk to customers regularly, and I know that today’s news will be very worrying for many.

“The price of energy has reached record levels driven by an aggressive economic act by the Russian state. They have slowly and deliberately turned off the gas supplies to Europe, causing harm to our households, businesses and the wider economy. Ofgem has no choice but to reflect these cost increases in the price cap.

“The Government support package is delivering help right now, but it’s clear the new Prime Minister will need to act further to tackle the impact of the price rises that are coming in October and next year. We are working with ministers, consumer groups and industry on a set of options for the incoming Prime Minister that will require urgent action. The response will need to match the scale of the crisis we have before us. With the right support in place and with regulator, government, industry and consumers working together, we can find a way through this.”

The new price cap level will take effect from 1 October 2022, but some suppliers may begin increasing direct debits before this date to spread costs. Customers worried about when their direct debit will increase should contact their supplier. Any money taken from customers to build up a credit will only ever be spent on their energy supply, and customers can ask for their credit balance to be returned at any time.

What are your options if you can't afford to pay your energy bills?

With the price of your energy about to hit record levels, with even more increases due to be inflicted on us all in 2023, it's always worth checking to see if you might be able to claim a grant or other benefit to help towards your energy costs.

Millions of households will be eligible for a £400 energy rebate later this year, with

the money being automatically taken off your energy bills in instalments from October, with households having £66 taken off in October and November, and £67 each month from December through to March next year. It's down to the energy suppliers to decide how they will process the rebate, some will add a credit to your bill, and others may send you the money instead of adding it to your account, although most are likely to simply credit this to your account.

Other options may be available to you as well. Many government schemes support free or subsidised energy-saving measures. These aim to help vulnerable people and encourage energy efficiency in our homes. Some schemes are provided directly through your supplier.

Check if you qualify for the governments:

  • Winter Fuel Payment – If you were born on or before 25 September 1956, you could get between £250 and £600 to help you pay your heating bills. This is known as a ‘Winter Fuel Payment’.

  • Winter fuel support scheme – Eligible households can claim a one-off £200 cash payment from their local authority. The money is to provide support for paying winter fuel bills. This is in addition to the winter fuel payment offered by the UK Government.

The payment will be available to all eligible energy customers regardless of how they pay for fuel. This includes payments made on a pre-payment meter, by direct debit, paid quarterly or for those who use off-grid fuel.

  • Cold Weather Payment – You’ll get a payment if the average temperature in your area is recorded as, or forecast to be, zero degrees celsius or below over 7 consecutive days. You’ll get £25 for each 7-day period of very cold weather between 1 November and 31 March.

  • Warm Home Discount – You could get £140 off your electricity bill for winter 2021 to 2022 under the Warm Home Discount Scheme.

The money is not paid to you - it’s a one-off discount on your electricity bill between October and March. You may be able to get a discount on your gas bill instead if your supplier provides you with both gas and electricity. Contact your supplier to find out.

  • Household Support Fund – a funding package to help vulnerable households. Contact your local council for advice and help in accessing the fund.

  • Child Winter Heating Assistance – Child Winter Heating Assistance is a benefit from the Scottish Government. It was first paid in 2020.

It’s a payment to help disabled children, young people, and their families with increased heating costs over winter. It’s paid once a year. The payment for winter 2022-2023 is £214.10.

Energy Company Grants

Many energy companies offer schemes or grants to help with home heating and energy costs. Some are open to anyone – you don’t need to be a customer.

The following energy suppliers offer grants to their customers:

  • British Gas Energy Support Fund - apply for a grant on the British Gas Energy Trust website

  • Scottish Power Hardship Fund - apply for a grant on the Scottish Power Hardship Fund website

  • Ovo Energy Fund - apply for a grant on the Ovo Energy Fund website

  • E.ON Energy Fund - apply for a grant on the E.ON Energy Fund website

  • E.ON Next Energy Fund - apply for a grant on the E.ON Next Energy Fund website

  • EDF Energy Customer Support Fund - sign up to the priority services register to apply for a grant on the EDF Energy website

  • Bulb Energy Fund - apply for a grant on the Bulb Energy Fund website

  • Octopus ‘Octo Assist Fund’ - apply for a grant on the Octopus website

If you can’t get a grant from your supplier, you might be able to get a grant from the British Gas Energy Trust. These grants are available to anyone - you don’t have to be a British Gas customer. You’ll need to get debt advice before applying - You can get assistance from Citizens Advice with this.

Ask about being put on your supplier’s Priority Services Register. The Priority Services Register is a free support service to help people in vulnerable situations. Energy suppliers and network operators offer it. Each keeps its own register. You need to contact your energy supplier or network operator to get on it.

Let's Talk has information on grants some charities offer and how to apply. Let's Talk provides a range of schemes to help those with utility debt, both individuals and small businesses.

Turn2Us has grants search and adviser locator tools. Charitable grants do not have to be paid back. Many charitable funds will help people who have No Recourse to Public Funds - and cannot claim welfare benefits.

Use the Simple Energy Advice website to explore ways to save on energy, such as through:

  • home insulation

  • boiler upgrades

  • using more green energy, like solar power.

Use their Energy Efficiency Calculator for personalised energy-saving advice for your building and area.

The Energy Savings Trust also offer Community Home Energy Checks in England and Wales.

Then look at home energy grants that may be able to pay for improvements.

Information correct as of the 26th August 2022


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