With the energy price cap increase, and a further increase potentially on the way in October, the Advice Centre have put together a summary of the key info you need to know.
Disclaimer: The information below is for reference only, and uses extracts from external websites. It is accurate as of 6th April 2022. For all enquiries, please contact the WSU Advice Centre
Energy Prices Hike (01/04/2022)
Price cap history
The price cap tariff was introduced on 1st January 2019 by regulator Ofgem, with the aim of preventing the millions of households on expensive standard or default variable tariffs from being ripped off.
The price cap limits what companies can charge in England for their default standard variable tariffs. Calling it a 'price cap' is actually a misnomer as there's no maximum you pay for energy - think of it more as a cap on the cost of each unit of gas and electricity. Most people who aren't on fixed tariffs will be on a price capped tariff. You will be on one if:
- You've never switched tariff
- Your cheap fixed tariff ended and you did nothing
- Your energy company recently went bust and you were moved elsewhere
The price cap gets revalued six-monthly, based on wholesale energy prices, which are now astronomically high. The latest cap will take effect from 1st April 2022, with Ofgem raising the level by 54% to £1,9711 for the average bill. Driven by an unprecedented rise in wholesale costs, this is £693 higher than the previous cap. It'll likely hit pockets immediately, as even while April usage is lower, direct debits will be upped based on annual usage.
The market is in crisis right now. Wholesale prices (which energy companies pay) are at unprecedented highs, so there is nothing meaningfully cheaper on the market than price-capped tariffs.
Due to the terrible events in Ukraine, on 2 March 2022, energy analysts at Cornwall Insight issued an emergency update of their prediction. It's now forecasting that the rise in October could be 47%. That would mean it is worth fixing, if you can, at a price no more than around 25% (previously 15%) above April's price cap.
So what should you do?
Remember that your first point of contact should be your existing supplier
- Ask your current supplier first, check with them if going on a standard contract may be cheaper than a fixed/price capped one. Prices of price-capped tariffs are already higher, and some have doubled in price.
- If you are on a price-capped tariff that expires later than 1st April 2022, see it to the end of your contract, and at least 17 days before the expiry date find the cheapest current alternative and switch over.
- If you are about to sign a contract with all bills included, the average approximate prices per month fall around £200 for a 2 to 3-bedroom property, £250 for a 4-bedroom, and £300+ for 5 or more bedrooms. Make sure you ask if your landlord has a fixed cap price per month on your tenancy agreement and negotiate this based on the approximate above figures. If there are no bills included, use multiple comparison websites (remember that each of these websites may be promoting certain utility companies so tread wisely) and find the best possible deal.
Risks
If you choose a fixed rate now and wholesale prices drop rapidly, so fixed rates get cheaper in future, you will have unnecessarily lost out on the current cheap cap rate. However, you could always switch to another fixed tariff at that point – there would be early exit fees, but these would be trivial in the big picture.
Then again, if you don't fix now and prices rise, fixed tariffs could get even more expensive.
Over the next year, if you can get a fix that is no more than 15% above the April price cap, which is the same as no more than around 75% above the current price cap, then it's worth fixing. Otherwise probably not, although if it's within a few percentage of that and you really want certainty, go for it. But you shouldn't be fixing at 40% more than the April price cap rate.
How to reduce your energy consumption
Slashing kWh consumption and “greening” your home is a win-win. It cuts your bills and your carbon emissions at the same time. Here’s how:
- Do the basics. Turn off the heating when you go out and radiators in rooms not in use. Nudging the thermostat down just 1 Celsius will save you around £80 a year at today’s prices – and much more once prices spike in April. Want the kitchen warm but only for breakfast? Use a timer. Many boilers have them built in.
- Be smart. Electronic smart meters show customers exactly how much power they use. That encourages people to think about ways to cut consumption, so the gadgets have never been more important. Call your supplier for a free installation. Some smart meters have the option of mobile apps, so you can check your consumption on the go, set reminders, etc.
Frequently asked questions
I WON’T be able to pay my energy bill after the price cap rises. What should I do?
Call your supplier. Ofgem rules mean your supplier is obliged to help you – by reducing your payments, giving you more time to pay or offering a payment break.
Will I be cut off?
No – not even if you fall behind on debt repayments.
I was repaying debt to my old supplier, which went bust. My new supplier has sent a bill for everything I owe. What can I do?
Send your new energy company proof of your repayment plan with the previous provider. The new company should honour that plan.
Where can I get free energy debt advice?
Contact Citizens Advice on 0808 223 1133, National Debtline on 0808 808 4000, StepChange on 0800 138 1111
The WSU Advice Centre will be able to help with any enquiries about the upcoming energy bills hike, so please do contact us using the Enquiry Form
References
Gas, Electric & Water Guides - MoneySavingExpert
Check if the energy price cap affects you | Ofgem
Four ways to help you tackle rising energy costs and avoid 'fuel poverty' (thesun.co.uk)