The energy price cap for October has finally been confirmed – with millions of Brits set to see their bills soar by £1,578 a year on average.
Ofgem has announced that its price cap will rise to £3,549 for those on default tariffs paying by direct debit – up from the current figure of £1,971 and an 80% increase.
For those paying by prepayment meter – typically vulnerable households or those struggling to pay for their energy – there is a bigger jump from £2,017 to £3,608.
Standard credit customers – so where you pay once you’ve received your bill – will see their price cap rise from £2,100 to £3,764.
Approximately 24 million households are covered by the energy price cap, including four million on prepayment meters.
The huge rise in the price cap will add more pressure on to families already struggling with the cost of living crisis – with campaigners fearing many will be pushed below the poverty line.
Ofgem has urged the the new Prime Minister to announce further financial support – with the price cap rise typically £750 more per year than help measures in May were based on.
Jonathan Brearley, CEO of Ofgem, said: “The Government support package is delivering help right now, but it’s clear the new Prime Minister will need to act further to tackle the impact of the price rises that are coming in October and next year.
“We are working with ministers, consumer groups and industry on a set of options for the incoming Prime Minister that will require urgent action.
“The response will need to match the scale of the crisis we have before us. With the right support in place and with regulator, government, industry and consumers working together, we can find a way through this.”
UNISON general secretary Christina McAnea described the new price cap announcement as “beyond a disaster for struggling households”.
She said: “People can’t even cover basic costs right now so they’ll be feeling sick at the thought of massive energy bills heading their way.
“After months of inertia, ministers must wake up to the seriousness of the situation.”
Chancellor of the Exchequer, Nadhim Zahawi said: “I know the energy price cap announcement this morning will cause stress and anxiety for many people, but help is coming with £400 off energy bills for all, the second instalment of a £650 payment for vulnerable households, and £300 for all pensioners.”
What is the Ofgem energy price cap?
The price cap sets a limit on the rates a supplier can charge for each unit of gas and electricity you use.
It also sets a maximum rate for the daily standing charge, which is what you pay to have your home connected to the grid.
Despite what its name suggests, the price cap isn’t actually a cap on your energy bill.
The price cap represents a customer with typical usage, paying by direct debit.
This means your total bill is still determined by how much energy you’re using – use more, and you’ll pay more.
The price cap is altered every three months, in January, April, July and October.
This means the next time it will be reviewed will be for the January price cap.
The price cap is based on a number of factors including the wholesale cost of power.
Will my energy bills go up?
You’ll be on the price cap if you’re a default tariff customer who is on a standard variable rate (SVR) tariff.
These are households who rolled onto their supplier’s standard rate after their fixed deal ended – so those who didn’t lock into another tariff.
It also applies to those who didn’t fix into a deal after being moved to a new energy provider after their old firm went bust.
If you are on an SVR tariff, then you will see your bills go up in line with the price cap.
What energy bill help is available?
The first step, if you’re worried about your bills, is to talk to your energy bill provider as soon as possible.
They might be able to put you on a payment plan or offer some sort of tailored support.
It’s also worth asking them if you’re definitely on their cheapest deal.
All the big energy firms have charitable hardship funds and grants that you may be eligible for if you’re struggling.
The British Gas Energy Trust can be accessed by anyone – not just its customers – providing you meet the eligibility criteria.
This offers grants worth up to £1,500.
If you’re over the state pension age, you may be eligible for the Winter Fuel Payment scheme, worth between £100 and £300 during the winter months.
The Warm Home Discount scheme, which is a one-off payment of £150 distributed by energy suppliers, will open again this winter for vulnerable households.
For specific energy debt help, speak to:
Home Energy Scotland
National Energy Action (NEA)
NI Energy Advice
For wider debt help, speak to:
What about the cost of living payments?
There is £650 payment being issued to those on means-tested benefits, including Universal Credit and Tax Credits.
There is also £150 for those on certain disability benefits, plus £300 for retirees who claim Winter Fuel Payments.
Finally, there is also a £400 energy discount coming from October, spread out over six months.
The cost of living support from the Government hasn’t been updated since May, during which time the predictions for the October price cap steadily worsened.
This has sparked calls from campaigners including Martin Lewis for more support to be announced, over fears families will be pushed below the poverty line this winter.