As expected bills will rise by 54% in April, but there are some new schemes to help some pay less.
The average energy bill is set to increase by £693 a year from April. And if you factor in a predicted 20% jump again in October), that’s really £890 added over a year. A huge amount for all of us.
And your’s could be even higher! If you use more than the average amount of gas and electricity, you will pay even more
Plus since each increase assumes you’re already on the cap, anyone currently on a fix will see an even bigger jump from their current bills.
I’m near the end of a fix so my direct debit is likely to increase from £114 a month to £220 in April. Almost double.
To mitigate this, the Government has announced a few measures to reduce what some will pay, so I’ve details of who will be eligible for these.
Plus, I’ve shared a quick guide to how to work out what your own bills will likely be so you can prepare for the bill shock.
What is the Price Cap?
The energy price cap is a limit to how much customers on standard variable tariffs can pay for their gas and electricity. It applies to each unit of energy, rather than your total bill.
It changes every six months, with announcements in February for a 1 April change, and August for a 1 October update. It can go up and down, though recently it’s just been going up and up.
The cap doesn’t apply to fixed rate energy deals. Though historically these have been less than the cap, they’re now so far above that set rate they’re best to avoid. Here’s more about how the Price Cap works.
How much will the Price Cap change in April?
The cap right now is set at an average of £1,277 a year. The new cap from 1 April will be £1,971 a year. That’s would give you a direct debit of around £165.
And don’t forget there will be another change in October, which analysts are predicting could be another 20% on top. That would mean another £200 added on between October 22 and March 23.
And that’s assuming we don’t get war between Russia and the Ukraine, which would severely disrupt energy supplies.
What support has been announced
The Government has revealed some grants and loans to bring some of those costs.
£150 Council Tax rebate in April
For those in England and living in a property banded A, B, C or D (around 80% of households), you’ll get £150 knocked off your bill in April. You won’t have to pay this back.
This is meant to target those on the lowest incomes, with the theory being households on these bands have less money. Though since these were decided 21 years ago, it is full of discrepancies.
£200 temporary credit in October
All UK electric bills (except Northern Ireland), will see bills discounted by £200 in October. However, you will have to pay this back. £40 payments will be due each year for five years from April 2023.
This isn’t specific to an individual or a household, it’ll just be taken off every bill this year and added to every bill in future years. So if you are living with someone now, but later live on your own, you’ll still pay back the full £200. And if you moved out of the UK, then you wouldn’t be liable to repay. You also can’t opt out of this payment.
But since this coincides with a predicted 20% increase (which works out at roughly £200) it effectively just means average bills won’t increase immediately. It also assumes prices don’t keep increasing.
Extra funds for local councils and devolved nations
There’s going to be a pot for English councils worth £144m to provide help to those who don’t pay Council Tax (e.g. on benefits), or are struggling but not covered by the A-D band discount.
There’s also £565m going to Scotland, Wales and Northern Ireland to provide similar help.
Working out how this will impact your bill
Sadly it’s not always as simple as saying add 54% to your current bill and that’s what you’ll pay for the next year.
First, that assumes you’re currently on the variable rate, but you could still be on a fixed deal (for now).
Next, your bill is a mix of a standing charge and unit charge, and that varies by provider and region.
Plus, there’s that second increase in October. Though the £200 loan will rule much of this out, it’s still worth calculating this especially if you usage is more than average.
And finally, there’s changing use through the year. Your direct debit is an average payment, but obviously you’ll use less in the summer than the winter. So that means that from October charges will be higher still. However, this is much harder to factor in so I’m going to just use the averaged out direct debit
So how do you work it all out? Well this method will give you an estimate to help you prepare.
Find your current energy bill
To get semi-accurate numbers, you’ll need to grab your bill. There are three figures to look for. First find your monthly direct debit. Then get the total energy use over the last 12 months. You’ll get a figure for gas and another for electricity. Make sure it’s the units used.
If you’re currently on a variable rate deal
We’ve got a couple more months at the current cap, so you’ll pay the same for the next two months.
Then add 54% to that monthly direct debit amount. Then multiply that by six. This is how much you’ll pay between April and the end of September via your direct debit. Your actual charges based on useage will likely be less, but let’s keep this figure for now.
If you are eligible for the Council Tax rebate, you can deduct £150 from this total.
This new monthly figure then needs to increase by 20%. Multiply that by four to get your bill total until the end of January 2023. Then remove £200 from this – but remember you will pay this back over the next five years.
Total this all together and that’s roughly what your bill will be for the next 12 months.
If you’re currently on a fixed deal
If you’re on a fix right now there are some extra steps you need to take at the beginning.
First work out how much you’ve still got to pay on this deal. Multiply your monthly direct debit by the months left of your fix. Since my fix ends in one month on 28 February, it means I’ve £113 left to pay.
You then need to work out how much this would go to under the current cap (ending 31 March). The easy way is to use a comparison site (try Cheap Energy Club from MSE) to see what you’ll pay at a different network’s variable rate tariff.
If like me you’ll pay this in March, use that figure for one month of your 12-month calculations. Then take that amount and follow the steps above to calculate what you’ll pay from April onwards.
Depending on when your fix ends, you’ll need to split that with the April to September figures.
What if you can’t afford this?
This is all really scary stuff. Over the last 12 months I’ve spent around £1300 on energy bills. For the next 12 it’ll double. And prices could carry on increasing after that. That’s a huge amount of money to part within a year. I can manage this, but many won’t be able to.
If you don’t think, or already know, you can afford this, then ask for help.
See if you’re eligible for the Warm Homes Discount, which is due to be extended to more people.
You should also talk to your supplier to see if they can reduce your direct debits to some you can afford. It means if you owe money it won’t be charged in one go, but spread over time.
Then it’s worth going to a free debt advisor service such as StepChange and NationalDebtline. They’ll help you look at other debts, and potentially freeze, reduce or wipe out what you owe.