Many households in Wales have seen huge rises in their energy costs in recent months as their fixed deals have expired and they have found providers simply aren't offering anything cheaper than their standard rate.
Yet what they've seen is only the start. The UK's price cap, set by regulator Ofgem, has kept gas and electricity fees charged by the UK's energy firms artificially below the wholesale rate those suppliers are playing. It has led to a wave of bankruptcies among smaller providers.
And we found on on Thursday what will happen when the cap expires. Regulator Ofgem is obliged to look at underlying energy costs to set a cap that is fair to suppliers and customers. The cap was last updated in August before what it describes as "the unprecedented spike in costs the market is facing". And it is now allowing energy bills to rise by 54%.
For an average family home on a default tariff paying by direct debit, their annual bill will rise by £693 to £1,971. For lower-income households using prepayment meters, will see an increase of £708 from £1,309 to £2,017.
Jonathan Brearley chief executive of Ofgem (the Office of Gas and Electricity Markets, said that the announcement will be "extremely worrying" for many people, especially those struggling to make ends meet.
“The energy market has faced a huge challenge due to the unprecedented increase in global gas prices, a once in a 30-year event, and Ofgem’s role as energy regulator is to ensure that, under the price cap, energy companies can only charge a fair price based on the true cost of supplying electricity and gas," he said.
Yet he had no optimism that this once in a 30-year event would lead to prices falling soon. "Right now, we are not seeing signs that these prices are coming down," he said.
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Chancellor of the Exchequer, Rishi Sunak, who announced rebates of up to £350 to help - see what that means for people in Wales here - also warned that higher energy prices would be here to stay.
In Parliament, he said: "It's important to think about why we are in this situation with higher energy prices, and the factors are entirely global in nature.
"I don't have a crystal ball about what might happen in the future, but it would be wrong and dishonest for me to stand here and say to people that we don't have to adjust to higher energy prices.
"We are unfortunately going to have to, but what the government can do is take the sting out of that adjustment to make sure the increase is smaller and initially spread over more years.
"That's what today's £350 rebate does."
But, why are gas and electricity prices rising so much? What impact does this have on us? And where can you get help? Here's everything you need to know.
Why are gas and electricity prices rising so much?
Many factors have contributed to this and it's not just happening in the UK but around the world.
Last winter saw a particularly cold winter for Europe, which emptied a lot of our gas supplies. On top of this, there have been disruptions to other sources of energy, such as nuclear and wind. In 2021, there was less wind than normal meaning that renewable generation fell to 24.3 TWh - the lowest value in four years.
The chart below shows wholesale electricity prices have risen in several European countries as a result:
Much of this rise has been driven by massive rises in the cost of gas. Some 90% of the UK's imports of natural gas come from Norway. The volume of imports this year has had to increase by more than a third because of a fall in UK production from the North Sea. These falls have been blamed on maintenance work on large gas facilities.
The chart below shows how the rise in gas costs have driven up electricity bills.
The UK has been particularly vulnerable to a spike in prices because of a lack of long-term gas storage. The Rough storage facility, owned by Centrica (parent company to British Gas), was shut in 2017 and not replaced, leaving us with less storage than many other nations.
Gas prices have risen globally because of rising demand for gas in Asia, particularly in China. There has also been a fall in the amount of gas supplied by Russia into Europe.
Analysts say this has been a strategic decision by Russia to give it greater leverage over the EU in its battle to win approval for the controversial Nord Stream 2 pipeline it wants to built to connect to Germany.
In November of last year, the UK and EU wholesale gas prices had risen by 17% after Germany's energy regulator suspended approval of the controversial natural gas pipeline.
Before now, the energy price cap has generally protected customers from the spike in wholesale prices, but due to today's announcement, this is set to change.
What does the energy price cap mean?
The energy price cap is the amount a utility company can charge an average customer per year in the UK for the amount of electricity and gas that they use. It's a protection placed by the UK government and calculated by Ofgem.
If you are unsure the name of the default tariff you're on, you can find out through the supplier for your property or you can check the last energy bill you've received.
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The cap was introduced in 2019 to prevent energy companies taking advantage of customers who did not switch tariffs. The regulator sets a tariff that allows energy companies to pass on all reasonable costs to customers, including increases in the cost of buying gas, but not to charge unreasonable costs.
The current cap, which was last updated in August ahead of the winter period, equates to a household bill of around £1,277 for the average home. It has meant that suppliers dependent on buying gas and electricity on the wholesale markets this winter have been losing millions by supplying customers at the prices set last summer.
Over the last year, 29 energy companies have exited the market or been put in special administration in the wake of soaring global gas prices, affecting around 4.3 million domestic customers.
The cap is reviewed every six months. This adjustment to reflect the recent spike in prices over the winter will take effect from April 1.
Cornwall Insight experts said they expect the cap to rise even further – to £2,329 – when it is reviewed again at the end of the summer ahead of the winter.
What impact will this have on me?
The new energy price cap will see household bills rise by as much as 50% amid a time where cost of living has risen drastically. In January, it was announced that the UK cost of living had risen by up to 5.4% in the 12 months to December - the highest rate of inflation in 30 years.
And as the cost of living rises for households across the UK, growing energy prices will disproportionately impact those on lower incomes.
According to ONS, two thirds (66%) of adults in the UK reported their cost of living had increased in the past month, with rising energy costs putting a strain on household budgets.
In January 2022, of those that had reported a rising cost of living to the ONS' Opinions and Lifestyle Survey (OPN), 79% cited higher gas and electricity bills as a cause.
Where can I get help as the cost of living increases?
The jump in the cost of living could put your household budgets under pressure. Some people might find themselves having to choose between heating and eating.
Here are some resources available if you need help.
Citizens Advice
Citizens Advice is an independent charity offering free, confidential support with legal, consumer, housing, debt and other problems. Its website details what help is available and where your nearest bureau is, for face-to-face advice.
Helpline: 0800 144 8848 in England / 0800 702 2020 in Wales (open 09.00 – 17.00 Monday-Friday)
The Trussell Trust
The Trussell Trust supports a national network of more than 1,200 food banks, providing emergency food for free to those who need it. You can use its website to locate support wherever you live.
Helpline: 0808 208 2138 (open 09.00 – 17.00 Monday-Friday)
Turn2us
Turn2us is a national charity providing practical support to people who are struggling financially. Its website includes a benefits calculator and details of schemes and grants in your area, including for energy and water bills.
Helpline: 0808 802 2000 (open 09.00 – 17.00 Monday-Friday)
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