With inflation being at a 40 year high and the effects of the war in Ukraine continuing to put pressure on global reserves, wholesale energy prices are being directly affected and this is having a direct impact on customers who are seeing their bills rise by an astronomical amount.
What is the Energy Price Cap?
The energy price cap is a limit set by the energy regulator Ofgem as a maximum amount that each energy supplier can charge for each unit of gas and electricity that a customer uses, as well as a limit for the daily standing charge – which is the amount you pay for being connected to the grid. Generally speaking, the biggest driving force for the price cap is the price of wholesale gas, as this is what is mainly used to provide the energy to our homes.
How much is the Energy Price Cap?
In April 2022 the energy price cap rose by over 50% on the previous 6 months, and predictions at the time painted a picture of even higher rises to come. Recent announcements from Ofgem have confirmed everyone’s worst fears, with an 80% rise coming into effect from October 1st 2022.
The energy price cap in April 2022 was set at £1,971 for a household on typical usage. In October 2022 it will be rising to £3,549. The most important thing to keep in mind when thinking about the new price cap is that it is not a limit on what you can be charged, the numbers quoted are estimates for a home using the average or “typical” amount energy. Theoretically if you use less, you will pay less, but on the flip side of that coin if your home uses more then you will have to pay more.
For an average home on typical usage the average unit prices for electricity are rising to 46.3p Daily Standing Charge, and 51.8p per kWh used. The average unit prices for gas are 28.4p Daily Standing Charge, and 14.8p per kWh used.
What can we do?
Investing in a solar panel and battery storage system is a great way to insulate yourself from not only this price rise, but the price rises that are predicted to keep coming in the future as well. However, this option isn’t going to be viable for everyone. Short of that, or any significant intervention from the UK government, all any of us can do is to take steps to reduce our energy usage as far as is practical.
Everything from turning appliances off at the wall so they aren’t sitting on standby to reduce electricity, to lowering the temperature of your boiler to reduce amount of gas required to heat your water and reduce gas usage, or even changing curtains to thermal lined and using draught excluders to keep heat in are all small changes we can do at home to try make a difference to these ever rising bills.
