Usually the main thing to worry about on the first day of the month is a pinch and a punch. Saturday 1 October will be a little different – it’s the day energy bills go up. After months of warnings about the rising price of gas and electricity, caused by the invasion of Ukraine, consumers will finally feel the impact – and there’s a lot of confusion. So what does it all mean?
In a nutshell
The combination of government schemes means that anyone who had been using comparatively little energy and paying up to £1,500 a year will see their bills fall. Heavy energy users will see prices rise by up to about 19%, according to Martin Lewis, the money saving expert.
Most people won’t pay £2,500
Price cap is a misleading term. The actual amount of people’s bills depends on the amount of energy used. In fact, the cap refers to the cost per kilowatt hour (kWh) for gas and electricity, which has been set at 10.30p per kWh for gas and 34.00p per kWh for electricity. The £2,500 figure refers to a notional average family using 12,000 kWh a year paying by direct debit – if you use more, you will pay more. People on pre-pay meters, or who pay after receiving a bill, will pay more.
It’s not just the price cap
The former chancellor Rishi Sunak introduced a £400 discount for energy bills, called the Energy Bills Support Scheme, which is due to start in October. Most households will receive discounts on their next six bills, or a payment in their bank account. Pensioners are also entitled to a £350 winter fuel allowance. Those on disability benefits are being given £150. And low-income families on benefits have received £326 so far, with another payment due.
Bills started going out this week
They have been causing some confusion. The 10.30p per kWh for gas and 34.00p per kWh for electricity are, in fact, averages. Your unit rate will differ depending on where you live: households in London and southern England will pay up to 10.50p per kWh for gas, but only 10.19p per kWh in the east Midlands. Electricity rates range from 36.01p per kWh in north Wales to 32.24p per kWh in northern England.
Some people have seen larger than expected direct debit increases. Rocio Concha, director of policy and advocacy for Which?, said: “Anyone who has been contacted about a direct debit increase can request that their provider justifies the change and reduces direct debit payments, if they are too high. Energy suppliers must now send clear and timely updates to their customers explaining exactly what their new bills will be and why.”
Things may get worse in April
The £400 discount runs out in April, and although people use less energy in warmer weather, most direct debits are unlikely to fall as they are set at a monthly amount that will cover a whole year’s use. That means that more than 60% of households will go into fuel poverty, according to Professor Jonathan Bradshaw of York University, unless wholesale energy prices fall or Liz Truss renews Rishi Sunak’s scheme.