The energy price cap increase came into effect today; expected to cause the average annual energy bill to rise by almost £700.
The energy price cap is set every six months to protect consumers from volatile price changes. Last year a combination of extended cold periods, low wind speeds rendering wind turbines inactive, and inclement weather damaging oil infrastructure resulted in wholesale oil and gas prices greatly increasing. The price increase is now being passed on to consumers.
The typical energy bill is expected to rise by £693 per year, while the bills for households on a prepayment meter are expected to increase by £708 per year. The rise represents an increase of 54% to the average energy bill, bringing the average annual household energy bill to £1,971 per year.
Earlier this year, the Chancellor announced his plans to lessen the impact of the rise, announcing measures that will make around 80% of households eligible to claim £350 towards paying their energy bills, although £200 of that must be repaid over the next 5 years.
The price cap increase coincides with increases for council tax, water bills, and car tax, while prices for general goods are rising at their highest rate in 30 years with inflation now at 6.2%.
The Resolution Foundation has stated that it expects the number of households in fuel poverty to increase to a total of 5 million households overnight.
Resolution Foundation economist Jonathan Marshall said:
“Another increase in energy bills this autumn hastens the need for more immediate support, as well as a clear, long-term strategy for improving home insulation, ramping up renewable and nuclear electricity generation, and reforming energy markets so that families’ energy bills are less dependent on global gas prices.”
The increase that comes into effect today was determined before Russia invaded Ukraine, and does not take the impacts of the war on energy prices into account. Russia is a major exporter of oil and gas, and the effects of the war and sanctions placed on Russia as a result of its invasion have led to the price of oil skyrocketing even higher than it was previously. The price cap is currently predicted to rise again, by up to £600, in October.
Citizens’ Advice has stated that the number of households that cannot afford their energy bills is expected to almost triple, up to more than 14 million, in October, if prices rise in the manner currently predicted.