Energy bills: Millions of homes face another hike in October. Photo: Yui Mok/PA via Getty
Most of us can hardly bear to think about what’s next when it comes to our energy bills, but we can’t bury our heads in the sand for long, because October’s alarming new energy price cap will be announced this year. month.
We have already been hit by nightmare bill increases. The price cap started rising from April 2021. Then we saw a bigger jump in October last year as the global economy opened up further. The increase in wholesale prices already heralded a big increase in April this year, but the change of pace came when Russia invaded Ukraine and caused wholesale gas prices to fall.
We saw some of the impact in April when prices rose 54% to £1,971, but the rise in October will make that look like small potatoes. When the new cap is announced, analysts expect it to rise by around 70% to an incredible £3,582.
The increase is on such a scale that it is difficult to appreciate how hard it will affect us, but the change will be profound. It means we will, on average, pay three times more for our energy than when the price cap was first introduced in 2018. E.ON has warned it could push 40% of people into energy poverty, and even to those who were. able to take April’s price increase on the chin may be left reeling with October’s.
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We’ve already seen people significantly reduce their energy use. Figures from the Office for National Statistics show that around 24 million people are trying to use less energy, with people aged 55-74 working harder to keep up. Those who are already turning down their thermostats and scheduling their showers are likely to take increasingly severe measures, while even those who have avoided blackouts so far will need to start saving energy.
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This won’t be the end either. Ofgem has announced that in future the energy price cap will be reviewed every three months, so the next rise will follow fairly quickly in January. Right now, analysts are predicting another rise at this point to £4,266. Then they expect the cap price to drop slightly next July, but that still means another year of pain.
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Will the government act?
There has been much debate about the future of energy prices and politicians on all sides have called for more to be done to protect people from the potentially devastating consequences of higher bills. Now that Boris Johnson has ruled out any action on the energy bills before he leaves office, much will depend on who becomes the next Prime Minister and what decisions they make between now and then.
There is a lot on the table, from removing VAT on fuel bills and cutting green fees to financial support for the most vulnerable. The new prime minister may even consider the more dramatic steps proposed by other parties, including reducing energy prices, financed by an extraordinary tax on energy companies. Yet right now, we’re not entirely sure who will lead the government when the energy price cap rises, let alone what they’ll do about it, so it’s easy to feel hopeless.
Should you refuse to pay?
It’s no wonder we’ve seen the emergence of a ‘Don’t Pay’ group, which suggests people don’t pay their bills, on the basis that they believe energy companies may not be able to catch up on arrears if enough people who don’t pay . It seems like an easy answer to a difficult question, but this is an incredibly dangerous choice.
He is using the Poll Tax protests as an example of when this has worked in the past, because it was removed after people refused to pay. However, it is not the same at all. The government implemented the Poll Tax and it was immediately replaced by an alternative way of raising revenue. These are private companies with a way to get paid and they will make sure you pay the price right away.
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First, missed bills will go on your credit record, so you may find it harder to borrow in the future. The longer the delays, the more damage it will do. There are likely to be late payment fees and your provider could transfer your debt to a debt collection agency, which will incur even more additional charges and fees.
Then, if your bills go unpaid for at least 28 days and you refuse to agree a repayment plan, they can force you to switch to a prepaid meter. This will mean you can’t use energy without paying, and you’ll pay even more for it. If you refuse to let them in to install the meter, they can get a lien, and the cost of the lien will be added to your outstanding debt. In extreme circumstances, they can disconnect you, and again, if you don’t let them in, they can do it remotely if you have a smart meter or get a court order.
What can you do?
The first step, especially as winter approaches, will be to reduce energy consumption as much as possible. For those with the cash to spare and access to tradespeople, the rising price of heating your home could mean it’s now cost-effective to consider expenses such as double glazing or insulation. If not, there are still steps you can take, such as turning down the thermostat a degree, turning off radiators in rooms that aren’t used regularly, being more ruthless with how often you use the dishwasher and washing machine, or installing DIY shot. proof
If you’re struggling with bills, help is available. This includes a grant of £400 for all UK households (£66 in October and November and £67 from December to March), which will be paid to your energy supplier and deducted from your bill. For people on low incomes, pensioners and people receiving disability benefits there are additional payments.
If you need more help, your first port of call should be your provider, because many of them offer support and grants to people in real difficulty. Even if you’re not a British Gas customer, you may be able to get help from the British Gas Energy Trust. There may also be local energy grant available for people in your circumstances. If you need help with this, you can contact Citizens Advice or Stepchange, as both charities are very experienced in helping people through the process. Citizens Advice also has an online guide to help break it down: Grants and benefits to help you pay your energy bills.
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You will most likely need to find other places where you can free up cash as well. This is much easier if you have an idea of what you’re spending and the things that make the most sense to cut your budget while prices are high. Banking apps may have some useful features to make this easier, or you might consider a standalone app.
It’s worth considering putting all of this information into an online budget calculator. You need to enter the details of what you spend at all levels, then consider the areas where you will be able to shop. According to the ONS, 26 million of us are cutting back on non-essentials and more than a third have cut back on essentials.
If you’ve already done everything you can think of, you may need to consider bigger lifestyle changes. These can be incredibly difficult – things like giving up a car can require a complete change of mindset, but when you’re trying to stay on top of rising costs like this, it pays not to rule anything out until you’ve considered it carefully . . Inflation won’t stay high forever and wages will eventually catch up. It’s just a matter of finding a way to make ends meet without racking up debt in between.
Sarah Coles is a personal finance analyst at Hargreaves Lansdown and co-host of the Switch Your Money On podcast.
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