What’s happening to energy prices?
Millions of households face a 54% energy bill hike from 1 April after the regulator Ofgem lifted the cap on default tariffs to the equivalent of just under £2,000 a year for an average user.
The price cap is a limit on a unit of gas and electricity – it’s not a cap on customers’ overall energy bills, which will still rise or fall in line with their energy use.
Under the new Ofgem cap, the average dual-fuel bill for a direct debit customer will go up by £693 a year, from its current level of £1,277. This will affect 22 million households.
The news is even worse for people who pay via other methods. About 4.5 million households use a prepayment meter, and they face a typical hike of £708 – from £1,309 to £2,017. Meanwhile, those customers who pay for their energy with cash or by cheque face an average bill of £2,101 for their gas and electricity.
From 1 April a typical customer paying by direct debit will be charged 28p a kilowatt-hour for electricity and 7p a kWh for gas. This is about double the unit prices being charged by the cheapest providers at the start of 2021.
For anyone with above-average energy use – for example, large families or older people in draughty homes – their annual bill could be much higher than the headlines suggest.
How will the government’s repayable energy bill discount work?
The government said all households will receive £200 off their energy bills, and will then pay this “loan” back at a rate of £40 a year over five yearsfrom 2023.
But the bad news is that this help does not arrive until the autumn, when energy bills may be even higher. That is because Ofgem is due to update – and almost certainly push up – the price cap when it makes its next announcement in August. If it does, bills will rise in October, just as the repayable discount is due.
The energy bills measure will provide about 28 million households with an upfront discount on their bills worth £200. Energy suppliers will apply this to domestic electricity customers from October, with the government picking up the tab initially.
This scheme will apply across England, Scotland and Wales (energy policy is devolved in Northern Ireland, so the Northern Ireland executive will be funded to provide comparable support, say ministers).
What other help is available to energy customers?
There is the warm home discount scheme, which currently offers a £140 discount to those on certain benefits during the winter months.
The government has confirmed it is going ahead with previously announced proposals to expand eligibility for the scheme by almost a third, so that 3 million vulnerable households will now benefit, as well as a planned £10 uplift to £150 from October.
At the moment, discounts are given automatically to people on pension credit, but other low-income households must apply and will get help only if their providers offer the scheme and there is still money available. To qualify, you need to receive one of a list of means-tested state benefits. Energy suppliers set their own criteria but jobseeker’s allowance, income support and child tax credit are typically on the list.
There are various other grants and forms of assistance. For example, there are cold weather payments: one-off amounts to help people pay for extra heating costs when it is very cold. Citizens Advice explains that you will only be eligible if you already receive certain benefits. It adds that if you are in debt to your energy supplier, you may be able to obtain a grant from one of the firms’ hardship funds to help pay it off.
How will the council tax rebate work?
In England, council taxpayers in properties falling in bands A-D will get a £150 refund in April – the same month that council tax is set to go up. The average council tax bill for a band D property is £1,898, and councils can increase bills by up to 3% this year without holding a referendum. Many have indicated they intend to do so, which will add £57 to the annual bill and eat into the benefit of the rebate.
Those who pay by direct debit will automatically receive £150 in their bank account. For other customers, the Treasury says: “Councils will be ready to process their claims in April.”
The devolved nations have been given funding that can be used for a similar scheme.
How much help could I be in line to receive?
Many households will qualify for the repayable energy discount and the council tax rebate, so will receive £350 worth of assistance this year. Those who meet new qualifying criteria for the warm homes discount will be able to get another £150 worth of assistance, although that may not be refunded until the end of next winter. In total that means £500 worth of help – albeit £200 of that is to be repaid.
