Energy bills will rise again, but there are ways to reduce your gas and electricity costs.
Energy bills could rise by 9 percent in October when Ofgem’s next energy price cap is announced, according to forecasts from analysts at Cornwall Insight.
The organisation warned that wholesale gas and electricity prices had recovered from 30-month lows and had become a “major factor in the forecast rise in bills”.
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This increase would add almost £150 a year to electricity bills, according to The Telegraph, adding “further pressure to millions of pensioners who will lose their heating allowances in winter”.
What is the energy price cap?
The cap on energy prices is set by the regulator Ofgem.
This is the maximum amount that energy suppliers can charge their customers for each unit of energy consumed and basic charge under a standardised variable tariff.
The cap was introduced in 2019 because of “concerns that customers would have to pay a ‘loyalty penalty’,” the Energy Saving Trust said.
The cap is “largely based on wholesale energy prices,” said MoneySavingExpert, and applies to providers’ standard and basic tariffs, “which currently apply to the vast majority of households.”
The price cap increased as wholesale prices rose as a result of the pandemic in 2021 and Russia’s invasion of Ukraine in 2022.
The price has since fallen and there were some competitive fixed tariffs earlier this year, says the MoneyWeek report, but “the situation has changed again” and it is unlikely that a fixed price contract will be found to avoid the energy cap increase.
What happens to the energy bills?
Ofgem will confirm the next energy price cap by 27 August.
Cornwall Insight, which is “widely respected for its accurate forecasts,” predicted a rise to £1,714 a year from October, according to BBC News – an annual increase of £146.
It would be the first increase since January last year, the Times said, when the price cap reached a “historic high” of £4,279.
Cornwall Insight also expects a “moderate increase” in January.
Dr Craig Lowrey, senior adviser at Cornwall Insights, said this was “not the news households want to hear as the colder months begin”.
“The aftermath of the energy crisis has left us with a market that is still very volatile and reacts quickly to bad news about supply,” he said.
“Nevertheless, while we do not expect a return to the extreme prices of recent years, it is unlikely that bills will return to the levels that were once considered normal. Without significant intervention, this could well be the new normal.”
How to reduce your energy costs
Using less energy at home is easier on our wallets, MoneySuperMarket said, and “also benefits the environment by reducing our carbon footprint.”
One of the “easiest ways” to save energy is to switch to efficient appliances and systems, according to the comparison website. This includes replacing conventional light bulbs with “energy-saving alternatives” and looking for appliances with an A+++ rating.
The “easiest way” to save energy and lower your bill, according to SaveMoneyCutCarbon, is to turn off or unplug appliances when they are not in use and “plug them back in just when you want to use them.”
By insulating your home and sealing all gaps to prevent draughts, “you can keep it warm in winter and cool in summer,” says CompareTheMarket, and it could also “cut your energy bills by almost half.”
Plus, if you turn your thermostat down a few degrees, you might not feel the difference, the comparison website added, “but you may see a reduction in heating bills.”