Energy regulator Ofgem is expected to announce a rise in the energy price cap this week amid soaring global gas prices.
Many households across the country have been told to brace for soaring energy prices in October - when the price cap rise will take effect - as they struggle to cope with the rising cost of living crisis.
Here's a breakdown of how the new energy price cap announcement will affect you and the cost of your bills.
What is the price cap?
The price cap is determined by the energy regulator Ofgem and enforces the maximum price an energy company can charge households on a standard variable tariff for each unit of energy they use - known as kilowatt hour. Previously, variable tariffs were more expensive than fixed-rate deals with a lot of people staying on these tariffs if they never switched supplies, had their fixed-term end or their supplier had gone out of business.
It is believed that around 23 million households in the UK have their domestic energy bill decided by Ofgem's price cap. A price cap is also decided for customers on prepayment meters which are separated from those with variable tariffs.
For standard energy bills, the price cap is controlled by the maximum standing charge and price per kWh of gas and electricity that your supplier can charge you.
nitially, the price cap that was introduced by Ofgem in 2019 only changed twice a year - once in April for the summer period and once in October. Now, Ofgem will update the price cap quarterly because the market has been moving so erratically.
When is the announcement for the price cap change?
Ofgem will announce the price cap change on Friday, August 26. Meanwhile, the changed price will come into effect on October 1.
What are current predictions?
According to analysts at Cornwall Insight, households could face an 80 per cent increase in bills going into the winter period. It states that the average cost could jump from today's £1,971 to £3,554.
How will bills be affected?
Due to the soaring cost of gas - which has soared mainly due to the invasion of Ukraine, customers have had to face higher bills thanks to calculated supply and demand. If the price cap is raised significantly, your household's energy bills will also rise with it.
If you're concerned about being able to afford your energy bill, Ofgem recommends contacting your energy supplier as soon as possible. Analyst Cornwall Insight warns that bills for direct debit customers could go up to £3,554 in October and could increase again to £4,650 in January.
Is there any support to help pay bills?
If you're concerned about being able to afford your energy bill, Ofgem recommends contacting your energy supplier as soon as possible.
Under official Ofgem rules, suppliers must work towards coming to an agreement with customers to establish a payment plan they can afford. Some suppliers also offer specific schemes to reward more energy-efficient homes as well as free boiler checks and upgrades.
The government is also providing extra support this winter with Winter Fuel Payments or the Warm Home Discount scheme while some charities may be able to provide a grant.
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