Navigating the Energy Price Cap: what it means for you
Just as temperatures are starting to drop, it’s been announced that energy prices in the UK are set to rise by 5% in from January 2024. In this blog we explore what that might mean for local residents. The increase represents a climb from £1,834 to £1,928 a year for a typical annual energy bill – a £94 increase.
From 1 January 2024, the unit rate for a typical user paying by Direct Debit will be 28.62p/kWh for electricity and 7.42p/kWh for gas. The average daily standing charge will be 53.35p/day for electricity and 29.60p/day for gas.
This increase is in response to a jump in wholesale gas and electricity prices as a result of world events, in particular the war in Ukraine.
In recent years the rising cost of energy has become a growing concern for households. Energy costs are double what they were two years ago. And whilst last year, the government provided some relief with a £400 payment to all households, this year that support has not been put in place.
On top of an existing cost of living crisis, the announcement is going to be concerning news for many.
What does the energy price cap mean for you?
The energy price cap, set by Ofgem, was designed to shield customers from sudden and steep increases in their energy bills. It refers to the maximum amount that energy firms can charge households per unit of energy and the standing charge on their ‘default tariffs’ – if you have a fixed tariff in place, this increase shouldn’t affect your bills at this time.
The cap is expressed in terms of how much a ‘typical’ household would pay for its energy. So if you are a high energy consuming household, your bills will reflect a higher price than the cap. For customers on prepay meters or who pay by cash or cheque, the cap is slightly higher than those who pay by Direct Debit, at £1,960 and £2,058 respectively.
It’s important to note that it is not the maximum a household can pay – if you use more energy, you will pay for more. The cap is about limiting how much a supplier can charge for each unit of energy and daily standing charge. Those who are likely to pay more than the cap include:
- High energy users
- Some fixed rate tariff customers
- Some very green tariffs are exempt
- If you pay by cash, cheque or quarterly Direct Debit.
- If you pre-pay
Struggling with energy bills?
Using less energy in your home, will mean your bill is lower. However, we know that the issue of affording to heat your home can easily throw people into energy insecurity – meaning concern over whether or not you can afford to heat your home.
Already there are seven million households in fuel poverty in the UK and its thought an additional 1.6 million more will be by April 2024.
If you or someone you know is struggling with energy bills or fuel insecurity, it’s advisable to reach out to local authorities, charities, or energy suppliers for assistance. There are often support programs and grants available to help vulnerable individuals and families manage their energy costs more effectively.
We have also put together a few resources that could help:
- Warmer Winter Checklist – includes tips and resources to help keep your home warm this winter, including advice on tackling draughts.
- No cost, low cost energy saving – find out the many free, or very low cost, things you can do to save energy this winter.
If you’d like any hard copies of these leaflets for your community group or building, please get in touch with us at info@lowcarbonhub.org.
You can read more at Ofgem.