Six million families may see their savings wiped out by the 80 per cent energy price tariff hike as experts warn the cap could hit £6,600 next year
- Households will see energy bills rise from almost £2k to £3.5k on October 1
- Energy firms will send out direct debit demands of an extra £1,600 within days
- The cost of electricity and gas is expected to rise rapidly again in the New Year
- Economists fear the cost of heating crisis will see inflation increase to 14.2%
Six million families could see their savings wiped out by the 80 per cent hike in energy tariffs, economists warned last night.
Households will see typical bills rise from £1,971 to £3,549 from October 1, watchdog Ofgem said yesterday. The unprecedented hike means double-digit inflation is here to stay and dual-fuel bills could hit £6,600 a year.
Demands for higher direct debit payments – at an average of an extra £1,600 a year – will be sent out within days. And a second raid on family budgets is expected before Christmas when direct debits go up again in anticipation of another punishing price cap rise in the New Year.
Energy costs are expected to stay sky-high until at least 2024.
Energy bills are expected to peak at £6,616 between April and June next year before falling down to £5,900 by December – almost three times the current rate
There have been protests against the latest price hikes which have been branded as unaffordable
Ofgem this week confirmed an 80.06 per cent rise in the energy price cap sending the average bill from £1,971 to £3,549
The price surge will drive inflation up to 14.2 per cent by January, according to the National Institute of Economic and Social Research. Professor Stephen Millard, its deputy director, said: ‘The poorest households will now be spending 25 per cent of their income just on energy bills.
‘Around 2.2million additional households [than previously predicted] will run out of savings by April 2024, bringing the total to around six million, nearly one in four.’
The institute said the only answer to poverty and destitution was targeted assistance for the poorest households, rather than a general subsidy for all. Charities warned that the sick and elderly would die of illnesses made worse by the cold and damp.
Adam Scorer of National Energy Action, a fuel poverty charity, said: ‘There will be a cost in lives, not just a cost of living crisis.’
Chancellor Nadhim Zahawi all but suggested households might need to ration energy use this winter
In other developments:
- Chancellor Nadhim Zahawi all but suggested households might need to ration energy use this winter;
- The number in fuel poverty – spending over 10 per cent of disposable income on heat – is set to double in a year to 8.9million;
- Boris Johnson promised more help and blamed Vladimir Putin’s barbaric invasion of Ukraine for the bill shock;
- Ofgem advised against joining protests that involve refusing to pay fuel bills;
- Russia has been burning off huge quantities of gas that it is unable to sell to Europe because of sanctions.
Research by Uswitch found monthly bills in October, November and December this year will hit around £243 for low usage, £363 for medium usage and £513 for high usage, the category typical for a family of five in a four-bed home.
Outgoing PM Boris Johnson has blamed Russian president Vladimir Putin for the current energy crisis
Tory leadership frontrunner Liz Truss has promised an emergency budget to address the cost of living crunch if she enters No 10
How will this young family cope with the energy price hike?
Ruby Blaken, 32, never used to have to worry about her energy bills.
However, the mother-of three has already seen her direct debits rise by £100 in the last six months.
And the latest price cap increase could raise them again to £334, more than three times what she was paying this time last year.
She and her husband Michael have already gone through their bank statements to see where they can make savings.
And so far the couple have cancelled several subscriptions and even some of their children’s after-school clubs. Mrs Blaken, who lives in Wiltshire, said: ‘We’ve had to ask if we can justify them doing things like swimming club, which is hard especially when they’re at school and other kids are still going.’
Ruby Blaken, with her children Florence, 3, and 18-month-old Archer, form Malmesbury, Wiltshire said she never used to worry about energy bills, but that has now changed
However as she runs her second-hand clothes business Second Snuggle from the family home, there is little she can do cut their energy costs.
‘I’m trying to do anything I can, turning things like chargers, toasters and microwaves off at the wall and doing things quickly, but I’m not sure how I’m going to keep going,’ Mrs Blaken added.
‘We are just going to have to find the extra cash from other outgoings.’
Ofgem changed the rules earlier this year to allow energy firms to change prices four times a year, rather than two. As a result, customers face one increase on October 1, another in January and then further changes in April and July.
Joe Malinowski, of TheEnergyShop.com, said: ‘As horrifying as this energy price cap increase is, the outlook is truly terrifying.
Energy Q&A
Should I switch tariffs?
There are no fixed deals on the open market that come close to the incoming price cap.
Yesterday, the cheapest one-year tariffs were priced at around £4,700.
Forecaster Cornwall Insight suggests the cap will rise again to £5,386 in January and £6,616 in April. But anyone fixing with a £4,700 deal today will miss out on at least four months of savings when the price cap is cheaper. Overall, the average household would save just under £300 by fixing, if Cornwall Insight’s figures are correct.
But experts say this saving is still probably too marginal to risk switching.
Joe Malinowski, of comparison service The Energy Shop, said: ‘You would ideally want to fix to a tariff that is significantly below £5,000.
‘Anyone who signs up to a £4,700 deal could end up regretting it if there is some kind of price freeze.’ He added: ‘In my opinion, there are too many uncertainties.’
Is £3,549 what I’ll be paying?
This figure is based on the average energy use of a typical household.
If you use more energy, your annual bills will be higher. This is because the price cap limits what suppliers can charge for the gas and electricity they sell per kilowatt hour (kWh) as well as their daily standing charges, which cover the cost of supplying your home.
From October, your energy provider will be able to charge up to 52p per kWh for electricity and 15p per kWh for gas, up from 28p and 7p respectively.
What if I’m on a pre-payment meter?
Around 4.5million households use energy pre-payment meters and the price cap has historically been higher for these customers.
From October the average pre-payment meter household will pay £3,608. Critics have long argued that this is unfair, when most prepayment customers are on low incomes.
But energy firms argue that they face extra administrative costs for these households.
By FIONA PARKER
‘With wholesale energy costs further accelerating even since this cap was set, energy bills of £5,000 and even £6,000 into 2023 start to come into sharp focus.’
The energy cap announced yesterday is a limit on the price suppliers can charge per unit, not a cap on the total bill. This means some could be left paying significantly more than £3,549, which is the yearly calculation for the average household.
Significantly, there is no cap on how much suppliers can charge firms. As a result, businesses from chip shops to industry, some producing vital CO2 gas, face closure.
Ofgem chief Jonathan Brearley said: ‘It will be devastating for many families when they hear how much their bills will go up.
‘We have seen the slow and deliberate shut- off of one of Europe’s major suppliers – Russia – of their gas. That has caused enormous price spikes in the market. So right now winter prices are 15 times the normal price. If that were happening with petrol, to fill your car would cost £400 to £500.’
He urged people not to join protest campaigns such as Don’t Pay UK because the cost of bad debts will be passed on to all customers. Asked whether bills could remain high for two years, he replied: ‘We do need to prepare for a world where this does last some time.’
Mr Zahawi said he was working on options to help householders through the winter, adding: ‘We should all look at our energy consumption. It is a difficult time. There is war on our continent.’
Mr Johnson attempted to offer reassurance, saying extra help was coming and accusing Putin of ‘gas price blackmail’.
Tory leadership frontrunner Liz Truss has promised an emergency budget to address the cost of living crunch if she enters No 10. Her spokesman said she would ‘ensure people get the support needed to get through these tough times’.
Her opponent Rishi Sunak told broadcasters that protecting households from rising energy bills would be his ‘immediate priority’.
Liberal Democrat leader Sir Ed Davey said the rise in the energy price cap was ‘nothing short of a catastrophe for millions of families and pensioners’. Labour’s Rachel Reeves said the announcement would ‘strike fear in the heart of many families, and force many to make unthinkable choices this winter’.
The Government is offering all households a minimum of £400 in support with up to £1,200 for the poorest. Charities and consumer groups insist this does not reflect the magnitude of the bills shock. The energy industry argued the situation demanded a package on a par with the billions spent in the pandemic.
How will the hike affect this widowed pensioner?
Widow Yvonne Bailey has already lost 11 kilos this year as she cannot afford to properly feed herself.
And the 77-year-old is concerned the winter will be much worse once the price cap rises. Miss Bailey, a former receptionist from West Oxfordshire, said: ‘I’m worried I’m going to end up in serious debt.
Widow Yvonne Bailey has already lost 11 kilos this year as she cannot afford to properly feed herself
‘I would like to see how government ministers could live on my income. When I saw the price cap rise, I felt sick.
‘There is no way out of it for pensioners. It already feels like every time I go to the supermarket costs have gone up again.’
Heating crisis ‘will cost lives’ warns charity who claim only a massive intervention by ministers will help householders
By SEAN POULTER
Charities warned yesterday that the soaring cost of heating your home will cost lives this winter.
An estimated two-thirds of households – or 45million Britons – could soon be pushed into fuel poverty, when more than 10 per cent of disposable income is spent on energy bills, analysis shows.
The forecast from the University of York came as the charity National Energy Action said the number in this category has already doubled in a year to 8.9million households.
As the nation faces an unprecedented rise in bills, charities and consumer groups warned that only massive government intervention – on the same scale as support during the pandemic – will help Britons to survive.
Adam Scorer, the NEA’s chief executive, said: ‘The scale of harm caused by these price rises needs to sink in. A warm home this winter will be a pipedream for millions as they are priced out of a decent and healthy quality of life. Without bold action to support the most vulnerable and those on the lowest incomes, this will effectively prise their fingers from the cliff edge and push them over the precipice.’
He added: ‘Households need money in their pockets to weather this storm or we are going to see millions in dangerously cold homes, suffering in misery with unimaginable debt and ill health. Even with a mild winter, millions are facing a big freeze. Action is needed now to prevent the bleakest of winters.
Consumer campaigner Martin Lewis described the increases as a catastrophe and also warned lives will be lost. ‘We are in an absolutely horrendous situation and it will get worse in January [when the next rise comes in],’ he said
‘When we are in winter, we will be looking at people who cannot afford to keep warm, who cannot afford to cook food, who cannot afford to give their children a bath. It has a real impact of people’s mental and physical well-being. There will be a cost in lives, not just a cost of living crisis.’
Consumer campaigner Martin Lewis described the increases as a catastrophe and also warned lives will be lost. ‘We are in an absolutely horrendous situation and it will get worse in January [when the next rise comes in],’ he said.
Mr Lewis stressed that yesterday’s new price cap only relates to a limit on the amount that energy companies can charge for each unit of gas and electricity – and is not a cap on overall bills. The new cap will mean a typical annual bill of £3,549 for normal use – but some will be paying considerably more. ‘I’ve been accused of catastrophising over this situation,’ he said. ‘Well, the reason I have catastrophised is this is a catastrophe, plain and simple. If we do not get further government intervention… lives will be lost this winter.’
Accusing ministers of failing to respond to warnings, he told BBC Radio 4’s Today programme that the scale of the increase had been widely predicted – and announcements to head off the effects should have already been in place.
Citizens Advice chief executive Dame Clare Moriarty said: ‘Every single day we’re already helping people in the most heart-breaking circumstances, trying to scrape together enough to feed their kids and keep the lights on.
‘This will get far, far worse unless the Government acts.’
Matthew Reed, chief executive of the end-of-life care charity Marie Curie, said: ‘The need to stay warm to keep pain at bay – and power specialist medical equipment – means that energy bills for some terminally ill people will be thousands of pounds higher than the average household.
‘Many won’t be able to afford this. With 30 per cent of excess winter deaths attributable to cold, damp housing, this could cost lives.’
Tom Marsland of the disability equality charity Scope said the price cap announcement ‘confirms disabled people’s fears’, adding: ‘We’ve been inundated with calls from disabled people who don’t know which way to turn and feel like they are being punished for using more energy.’
Rocio Concha of consumer group Which? said the ‘eye-watering increases’ will be unaffordable for households ‘up and down the country’ while Sara Ogilvie, policy director for the Child Poverty Action Group, said yesterday’s announcement ‘will terrify many low-income families’. She continued: ‘We know that families with children spend 30 per cent more on energy bills – yet the Government has completely failed to recognise the extra costs facing households with children.
‘The next prime minister will be on a collision course with reality unless they increase support to reflect the scale of need, and uprate benefits in line with inflation.’
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