Households across the UK are being stung by energy price hikes and an increase in the cost of living.
In May 2022, it was revealed that energy bills are set to increase by another £800 per year. This is following the previous rise in energy costs which took place in April, where many saw their energy bills go up by as much as 50%.
The constant spikes in energy prices have left homeowners, businesses and tenants across the country with two key questions: “Why are energy bills increasing and what can I do to keep my bills as low as possible?”
In this article, we’ll provide you with all the answers you need and equip you with our top tips to help you reduce your energy consumption and help lower your bills.
Why is the cost of energy increasing?
The recent energy price hikes are due to the raising of the energy price caps within the UK. Energy price caps are put in place by the market regulator Ofgem, in order to limit the amount in which energy suppliers can charge customers for gas and electricity. This system was introduced in 2019.
In April 2022, energy price caps increased by 54%, resulting in an average energy bill increase of £693 for households on default tariffs. This works out to around £1,971 per year. Properties that use prepayment metres also faced an energy bill rise of £708, which adds up to approximately £2,017 annually.
The last year has seen wholesale energy costs almost quadruple. Due to these expensive wholesale gas and electricity prices, energy providers have been forced to raise their energy rates as they cannot afford to supply energy at a lower rate than what they pay for it. Consequently, homeowners, tenants and businesses have faced significant increases in their energy bills.
The cost which is increased is not passed to the user right away just because it is measured by its price cap. This provides a limit to the supplier that how much they can charge the users for electricity and gas both.
Regulator of energy
The price cap for energy is usually look after by Ofgem because they are the regulator of energy, and it is their responsibility to review these prices after every six months. Next week Ofgem will announce what the increase will be from April, with estimates that it will rise by up to £700. These prices are considered as one of the highest from last year that has been faced by its consumer. This means that it has reached its highest level which is £1,277 on an average for every household.
If you are using a Standard Variable Tarif then you will also bear the increase in price cap for your energy bills. On the other hand, If you are using a Fixed Rate Tariff, then you will not be affected as your bill price will remain same till the time your contract ends. If you don’t have proper information that on which tariff you are being charged, then you can get this information by getting in touch with your supplier or you can also check your bill to find out. In the past, it would have been a good idea to switch to a new energy supplier or ask your current supplier for a better deal.
The Impact of Russia vs Ukraine on energy costs
The conflict between Russia and Ukraine has had a part to play in the energy price spikes we are facing in the UK.
Russia is currently the second largest exporter of crude oil and the biggest exporter of natural gas in the world.
The UK sources 6% of its crude oil and 5% of its natural gas from Russia. This natural gas is used within the country to heat homes and fuel cars and planes.
Places like Europe get around 40% of their natural gas supply from Russia.
If Russia decides to disrupt their supply of fuel, countries will have to purchase energy elsewhere, likely at a higher price. Also, as the demand for energy increases, so will its cost. Resulting in even higher energy bills for all.
Will energy prices keep rising?
In May 2022, Jonathon Brearley, Ofgem’s Chief Executive Officer, confirmed that we will see energy prices increase again in October.
The energy price caps are expected to increase to £2,800 per year. This will result in households having to pay an additional £800 in fuel bills on a yearly basis.
These energy cost increases are likely to have a significant impact on many households across the UK, not to mention the effect it will have on the cost of living.
Brearley estimates that fuel poverty in households could double to 12 million.
A property is said to be in fuel poverty when inhabitants spend 10% or more of their disposable income on their energy bills.
Top tips for reducing your energy bills
With energy costs consistently rising, energy efficiency is more important than ever. Boosting your household’s energy efficiency can not only help you save, but it can also benefit the environment by lowering your carbon footprint.
Here are top tips to help you save on your energy bills:
Insulate your home
Insulate parts of your home like your walls, roof, loft and floors to boost your property’s heat retention. This measure creates a barrier between your home’s temperature and the conditions outside, helping to keep your rooms warm during winter and cool during the summer. Insulation could lead to savings of up to £650 per year [1].
Switch to LEDs
Energy-saving LEDs could help you save up to £40 per year on your energy bills, according to the Energy Saving Trust [2]. Light-emitting diodes (LEDs) are 90% more efficient than standard lightbulbs and they can last for up to 10 years in operation. They are a significantly cost-effective solution.
Get a new gas boiler
Another highly effective way of reducing your energy bills is to upgrade your heating system with a new gas boiler. Over 50% of your energy costs are likely to be spent on heating and hot water, so it’s essential that your boiler system is efficient. Not only could you save up to £300 on your energy bills by investing in a new boiler, but you could also effectively increase the levels of comfort in your home through receiving a better quality of central heating [3].
Turn your appliances off standby
Did you know that your appliances still use energy when they’re in standby mode? This is known as “phantom power” and thousands of households waste energy this way on a daily basis. Turn your appliances completely off at the switch and you could save around £55 per year on your energy bills [4].
Increase your water efficiency
In the average household, over 50% of the energy costs is spent on heating water [5]. Thus, you could make significant savings by using water more efficiently within your home. For example, you sticking to four-minute showers you could save up to £70 per year [6]. You could also save a further £38 per year by investing in an efficient shower head. You should also aim to ensure that all taps are turned off properly – a leaking tap could waste up to 5,300 litres of water per year!
Check your thermostat
Turning your thermostat down by only 1 degree can prevent around £65 a year. Only lower it to a temperature you are feeling comfortable at – as a guide, many folks find this can be between 18-21 degrees.
Keep the warmth in
Check your home for any gaps within the doors, windows and floors. Blocking any holes where you’ll get a draught could prevent around £30 a year. If you’re renting, ask your landlord to confirm your home has good insulation.
Turn off anything you’re not using
Turning your appliances, like TVs and washing machines, off rather than leaving them on standby could save around £40 a year. Turning off lights when you’re not using them – whether it’s just off for some seconds – could save £14 a year. think about using LED lightbulbs, which cost less to run.
Watch your water usage
Cutting your shower time by only one minute can make a difference. If everyone in a very four-person household with a meter did this, you may save £45 a year.
What support am I able to get?
If you’re struggling to afford your energy bills, you may be ready to get support from the govt or your energy supplier. the primary step is to call your supplier and ask them if they provide any grants to assist together with your energy bills.
You may be eligible for these benefits:
Warm Home Discount
This provides you £140 off your electricity bill if you’re on a coffee income. If you get the guaranteed element of pension credit, you must get the discount automatically. talk to your supplier to determine if they provide the nice and cosy Home Discount because not all of them do.
Winter Fuel Payment
This is often an annual one-off payment to assist you pay money for heating during the winter. you’ll be able to usually get a Winter Fuel Payment if you were born on or before 26 September 1955. If you’re eligible, you ought to get this automatically. However, if you think that you’re eligible and haven’t been receiving it you’ll contact the Winter Fuel Payment Centre (Telephone: 0800 731 0160 / Textphone: 0800 731 0176)
Household Support Fund
In England, your local council might provide you with vouchers to assist obtain day-to-day essentials. this is often referred to as ‘welfare assistance’ or the ‘Household Support Fund’. Each council runs their own scheme. the assistance on offer and who can comprehend varies. You can find the local council with the help of Gov.Uk and you can get the information related to it. You don’t should be in receipt of advantages to induce this support. If you reside in Wales, contact your bureau.
Even if you’re not eligible for grants, suppliers still have to support you to manage your payments supported what you’ll afford. reckoning on your circumstances, they’ll also give you a referral for independent debt support or energy efficiency advice. they will even be ready to give you temporary credit for your prepay meter that you’ll have to repay.