Energy price cap rise: How much extra you’ll be paying for gas and electricity

Ros Atkins on why energy bills are rising

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The energy price cap will rise by 54 percent – or £693 – in April, Ofgem has announced today. The cap now stands at a record £1,971 for a typical household, just one element of one of the worst cost of living crises in a generation.

Families are now facing their biggest fall in disposable income in three decades, the Bank of England has warned.

Along with the huge rise in energy costs, the central bank put up the interest rate to 0.5 percent, while it’s predicted inflation will hit 7.25 percent in April.

The energy price cap will come into force in April – the same time as the National Insurance hike on Britain’s hard-working population.

The energy market has undergone one of its biggest crises in recent memory in the last six months thanks to the skyrocketing cost of natural gases.

READ MORE: Rishi Sunak accused of ‘robbing the poor to pay the rich’

What is the energy price cap?

The price cap is set per unit of energy used with the increase calculated based on a household that uses a “typical” amount of energy – the more you use, the more you pay.

It is not a limit on the overall spend – it is the upper limit of what an energy company can charge you per kWh of energy used.

Created in 2019, it has helped consumers by limiting the amount of profit energy companies can make.

How much will it go up on my tariff?

Around 22 million customers are on standard rate tariffs that will be subject to the price hike and could be paying £693 more from April.

If you are on a fixed rate tariff when your contract ends you will be moved onto a new tariff that will include the rise.

For customers with prepayment meters, the price cap will go up by £708 to £2,017 per year.

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Does the price cap always rise?

No – there have been times when the price cap has gone down, dependent on the cost of wholesale gas at the time.

Since the cap was created, it dropped to its lowest point in August 2020, when it was £1,042 per year – almost a grand less than it will become in April.

It’s grown steadily since then – rising to £1,277 in August 2021 – but this is the biggest ever jump for the cap.

What help is available?

Chancellor Rishi Sunak has promised very limited help for households through the energy price rises.

He announced a £200 rebate on energy bills, which will have to be paid back, and a £150 reduction in council tax for millions in England, which will not have to be paid back.

Mr Sunak said it would “take the sting” out of the rising costs for customers – despite the fact the burden will be placed on the consumer.

When will energy prices drop?

Unfortunately, experts aren’t expecting a change in energy prices soon.

Chris Bowden, founder and CEO, Squeaky, told “Without doubt, the future of energy prices is uncertain, and costs will remain historically high and volatile for some time to come.

“We’re seeing the old economic theory of supply and demand taking its revenge.

“The fundamental composition of the oil market highlights significant dislocations with a two million barrel per day deficit of supply to demand, and in inventories at five-year lows.

“It’s not clear whether new oil and gas exploration will deliver the required returns given the global push to stem climate change by decarbonising the economy.

“As such, many oil and gas companies are being run to generate free cash more than growth, and this dwindling supply is colliding with rising demand to push up prices to, in the case of gas, historic highs.

“The next two years could require nearly all of the world’s spare oil and gas production capacity as demand rises above pre-pandemic levels.”

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