Anyone hoping for a let-up in the UK’s cost-of-living crisis this autumn is, unfortunately, set to be disappointed. You don’t need us to tell you that households are facing soaring energy prices due to supply and demand issues on the worldwide wholesale market. (Equally, of course, the war in Ukraine has endangered supplies from Russia and this in turn has affected the prices we all pay.)
What is the energy price cap?
Price caps aim to ensure fairer prices by limiting how much suppliers can bill customers per unit of energy and as standing charges. It’s a backstop protection from the government, which industry regulator Ofgem calculates and adjusts twice a year – although this could increase to quarterly in the future. It’s based on how much energy suppliers pay producers for gas and electricity. (It does not include Northern Ireland, although prices there have also risen.)
What’s likely to happen in October?
Energy prices will rise again in October, just a few months away. And now Ofgem has warned that the cap could be higher than forecast previously. This May, the regulator said it would reach £2,800 by October. Now, while it doesn’t want to provide a running commentary, Ofgem says this could have been an under-estimated figure.
Cornwall Insight, which provides energy market intelligence and analysis, told the BBC that said that the typical domestic customer would probably pay £3,244 annually from October, or a 64% hike, then £3,363 a year from January 2023. The average bill is typically £2,000 yearly following the April price cap price, already an increase of £600 on average compared with autumn last year.
What can I do to prepare ahead of the October price hike?
Martin Lewis of MoneySavingExpert.com warns of a potentially difficult winter ahead as we put the heating back on, and need more lights as the evenings lengthen. The consumer champion also highlighted that the government’s £15bn support package won’t go far enough.
Here are some key considerations:
- If you can fix, aim to do so at a rate meaning you’ll pay less than 57% more a year than the current price cap. However, some fixed tariffs have also rocked in price too.
- Find out if you’re entitled to any cost-of-living payments if you are on a lower income. The first payments are already being made, for example, for those claiming means-tested benefits. Meanwhile, pensioners on low incomes may be due an additional £650.
- Give your accounts an overhaul and see where you can save money. If you earn more than you spend at the moment, start putting some spare funds aside now. It could make a real difference come the autumn and winter.
- Look at how you can reduce your energy usage. Ideas range from not leaving devices on standby (although that’s not necessarily the issue it once was), always filling the washing machine, cutting shower times, not overfilling the kettle, fitting a water-saving shower head and cutting shower times and working out where draughts are coming from and excluding them.
Finally, one of the easiest and most obvious things to do is to turn your thermostat down.
Switch to Utility Warehouse
At UW, we can help you lock in energy rates ahead of the autumn price hikes, giving you real choice. Our new Fixed Price Energy Tariff, available when you take energy plus at least two other services, costs £2,635 annually on average and offers savings of more than £345 against the price cap while allowing you to fix prices until the end of July 2023.
Talk to us today about how you can start to make next winter a little more comfortable.