Disclaimer: The information below is for reference only, and uses extracts from external websites. It is accurate as of 22^nd June 2022. For all enquiries, please contact the WSU Advice Centre

Energy Prices Hike (22.06.2022)

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

It currently changes every six months, though that'll soon be every three, based on wholesale energy prices, which are now astronomically high. The latest cap has been in effect from 1^st April 2022, with Ofgem raising the level by 54% to £1,971 for the average bill. The cap is also expected to rise again this winter, with energy analysts Cornwall Insight predicting another rise of 51% to £2,980 a year in October

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

1. Ask your current supplier first - check with them if going on a fixed/price capped tariff will be cheaper with the forecasted price cap coming in October 2022. Prices of price-capped tariffs are already higher, and some have doubled in price, but if they are about 25% more than your standard tariff, you should fix.
2. 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.
3. 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.
4. 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 - If there is a clause on your tenancy agreement that prohibits you from changing suppliers, please contact our Advice Centre

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 an early exit fee (£30 on average), but these would be trivial in the big picture as you will be saving much more in the long run.

Then again, if you don't fix now and prices rise, fixed tariffs could get even more expensive, which is the current forecast.

Over the next year, if you can get a fix that is no more than 25% above the April 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

People may ask what my price cap is and how do I calculate what is the best price for me. You could use comparison websites, but the easiest way is this:

1. Find out what your standard tariff is at present either by calling your supplier or through your online account or app – if you are on dual tariff (gas + electric), add them up.
2. Example: let’s say that your standard tariff presently for a 2-bedroom home is at £130 per month for both gas and electric. 25% of £130 is £32.50.
3. Call your current supplier and ask if they offer a fixed contract of on or around the £162.50 per month, and if they do, then you should take it. You can also do this online or on an app.

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 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)