- Written by Kevin Beachy
- Cost of Living Reporter
Image source, Getty Images
Home energy prices will rise in January, putting more financial pressure on bill payers at the coldest time of the year.
The typical annual household bill will rise from £1,834 to £1,928, an increase of £94 or 5%, energy regulator Ofgem said.
She said the higher bills would be “worrying” at a difficult time for many people, but were a result of higher wholesale costs faced by suppliers.
Analysts expect prices to fall again in March.
The price cap set by the regulator affects 29 million households in England, Wales and Scotland. The rules are different in Northern Ireland. Ofgem sets the maximum amount suppliers can charge per unit of gas and electricity but not the total bill, so if you use more, you’ll pay more.
Specifically, gas will be priced at 7 pence per kilowatt-hour, and electricity will be 29 pence per kilowatt-hour.
Jonathan Brierley, chief executive of Ofgem, said: “It is important that customers are supported, and we have made clear to suppliers that we expect them to identify and provide assistance to those struggling with bills.”
Dr Craig Lowry, principal consultant at energy analytics firm Cornwall Insight, said: “In the midst of a cost of living crisis, the last thing households need is higher energy bills – especially heading into the winter months.
“However, as is often the case in the energy market, new challenges have emerged, and our dependence on foreign energy has once again made the UK vulnerable to price increases caused by events around the world.”
For clients like Roy Bridgwood, rising rates will add extra pressure to financial difficulties he is already struggling to cope with.
Roy Bridgwood says paying the bills has been difficult
Mr Bridgwood, from Manchester, has debts of around £1,400 due to gas and electricity bills.
“The last payment I made for gas was about £800. That was every penny I had left in my savings,” he said.
He has been unemployed for a year and has two teenage children at home.
“I’m struggling to get a job, I’m struggling to pay bills and I’m struggling to make a living. You feel vulnerable,” he said.
Experts say he tries sensibly to pay what he can, and is open with his suppliers.
The vast majority of people pay by direct debit, with payments being facilitated throughout the year.
Households using prepaid meters will be the most affected by price rises during the winter, as customers tend to pay for a top-up just before using gas and electricity. Their typical annual bill will rise to £1,960 in January.
Those who pay quarterly with cash or checks pay more than those who use other payment methods. Their typical annual bill in January is £2,058, around £130 a year more than if they paid by direct debit.
Part of Ofgem’s announcement includes a maximum standing charge – a fixed daily fee that covers the costs of connecting to a source of supply.
There was anger over the increase in fees and the inability of customers to reduce what they pay. Ofgem recently launched a review into these accusations and asked for the public’s views.
Fees vary depending on where customers live, but the amount of energy they use has nothing to do with this part of the household bill.
In most areas, fees have doubled over the past two years. In January, a typical household will pay 53p a day for electricity and 30p a day for gas.
Last winter, overall energy prices were high, and the rises would have been even greater had it not been for the government’s energy price guarantee which caps a typical bill at £2,500. Each household also received £400 support over six months, but the government has not announced any similar scheme this year.
The withdrawal of subsidies and rising prices mean that bills this winter may be higher than they were last winter for millions of families.
Treasurer Jeremy Hunt told the BBC he understood that “a lot of families are suffering”, and pointed to increases in pensions and benefits announced in the autumn statement that would help pay energy bills.
However, he did not clarify whether more direct support would be provided.
Gillian Cooper, energy director at Citizens Advice, said: “Yesterday, the government missed the opportunity to announce additional support for households who need it most this winter.”
The typical household energy bill fell by £240 a year in October to £1,834 a year, but of that, £89 was not an actual reduction in the price you pay, but actually the result of a new estimate for the typical amount of gas and electricity that homes use. Had the calculation not been adjusted, the reduction would have been £151 per year.
Typical annual household consumption is now estimated at 2,700 kWh per year for electricity, and 11,500 kWh per year for gas.
What can I do if I can’t afford my energy bill?
- Check your direct debit: Your monthly payment is based on your estimated energy usage for the year. Your supplier can reduce your bill if your actual usage is less than estimated.
- Pay what you can: If you can’t meet direct debits or quarterly payments, ask your supplier for a ‘able to pay plan’ based on what you can afford.
- Claim what you are entitled to: Make sure you claim all possible benefits. The Independent MoneyHelper The site has a useful guide.
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