Energy price cap rise explained as bills soar – exactly how you’ll be affected

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Millions of Brits will see their energy bills rise as energy regulator Ofgem announced the new energy price cap.

The cost of energy bills is set to soar by an average of £693 per household in England, Scotland and Wales annually. The steep rise will now see the average customer's costs rise from £1,277 to £1,971, on average, each year.

People across England, Scotland and Wales will feel the brunt of these hikes in just months, with the new eye-watering 54% price cap coming into effect this year.

There are worries of people being plunged into fuel poverty and 22 million households as many fear they won't be able to afford their bills anymore. Here's everything you need to know about the energy price cap including why the prices are going up and by how much.

What is the energy price cap?

The energy price cap is the maximum amount a utility company can charge an average customer, in the UK, per year for the amount of electricity and gas they use.

The cap, which was introduced in January 2019, is set by energy regulator Ofgem and is reviewed every six months. It affects 11 million people in the UK who are on standard or variable tariffs.

Previously, the cap was £1,277 – a 12% rise on the previous price – which was set last August. This has now changed with the latest Ofgem announcement.

Why are energy prices going up?

Energy prices went up throughout 2021, not just in the UK but around the world, due to several factors.

For instance, winter was particularly cold in Europe last year, which drove up demand and led to stored gas supplies being used up.

There was also more demand in China and other parts of Asia while Russian pipeline gas supplies were lower than expected.

Another issue was the relative lack of renewable sources, like wind and solar, last year that made generating power from these sources more difficult and caused many to turn their heating up during the winter.

All of this put a lot of pressure on energy companies, leading to the collapse of 28 firms and affecting more than four million households.

The UK has been hit quite hard as one of Europe's biggest users of natural gas, with 85% of homes having gas central heating. The storage capacity in the UK is also lower than in some other European countries.

While the price cap has mostly protected consumers from the spike in wholesale prices, as retailers were unable to pass the higher prices to their customers, but this will change soon.

When do prices go up – and how much?

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Ofgem announced that there would be a 54% increase in electricity and gas bills. This means that, on average, people in England, Scotland and Wales would see gas and electricity tariffs rise by £693, from April 1, 2022.

Around 4.5 million customers who use prepayment meters are also set to see an increase of £708 to £2,017.

Immediately after the Ofgem announcement, chancellor Rishi Sunak has confirmed that selected households would receive £350 as support including £200 off energy bills – to be repaid over five years from next year – as well as a £150 council tax discount.

This would come in the form of a £200 discount on all electricity bills from October, 2022, which will need to be repaid later down the line. Additionally, there will be a £150 council tax rebate for those in council tax bands A to D.

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  • Rishi Sunak

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