The Times - UK (2022-06-11)

4 Saturday June 11 2022
the times

Navigating the cost of

living crisis

What else can I do?

Check your direct debits. Many suppliers

are asking customers to increase direct

debits to cover rising costs, but in some

cases the increases are far higher than

the increase in the prices themselves.

Submit meter readings so you don’t have

to use your supplier’s estimates and ask

it to set payments at a level close to what

you actually use each month.

Taking regular meter readings will also

help you to avoid ending up in huge debt

or with lots of credit.

Set money aside to prepare for the

October bill shock and make as many

energy-saving changes now as possible.

How to save energy

Get a free smart meter — it will show

you how much energy you use in real

time so you can see where to cut back. It

can also submit usage readings so you

don’t need estimated bills. Contact your

energy provider if you want a smart

meter installed.

Adjust your boiler — typically the flow

setting on a combi boiler is set to heat

water to 80C before it travels through

your pipes and radiators, returning at

60C having given 20C to the room. The

Heating & Hotwater Industry Council

said you can save up to 8 per cent on

heating bills by turning this down while

maintaining the same 20C heat release.

Follow instructions at heatinghub.co.uk.

Change your lightbulbs — if you

swapped an old halogen lightbulb for an

LED bulb and used it for about four

hours a day you would save about £13.60

a year at present energy prices.

If you can’t afford it all at once, make a

pledge to replace every lightbulb with an

LED as soon as it goes. They’ll last

longer too, so you’ll see more savings in

the long run.

A

s if the April energy price
increase was not bad
enough, households
should brace themselves
for further increases in
October.
The energy bill for the
average UK household on the default
energy tariff rose by about £58 a month
from April due to a 54 per cent increase

Energy bills: soften the blow

to the energy price cap.

From October, when the energy

regulator Ofgem next adjusts the

price cap, bills are expected to

increase by 46 per cent from an

average of £1,971 a year to about

£2,880 — that’s an extra £76 a month.

To ease the blow, the government

has announced that every household in

England, Scotland and Wales will receive

a £400 grant from October to reduce the

cost of their energy bills. This replaces

the planned £200 loan and will not need

to be repaid. The discount will be given

automatically by suppliers.

There will also be additional grants

for those on low incomes, and those

who receive disability benefit or the

winter fuel payment (see Cost of living

help, right).

In Northern Ireland the energy

market is regulated by the Utility

Regulator, which does not set a price

cap. Support payments of £200 were

issued there in March.

Despite the support, charities and

consumer groups have warned that the

price increases will still make life difficult

for households already struggling with

the rising cost of living.

How does the price cap work?

Energy companies charge a set price for

every unit of gas or electricity (a kilowatt

hour, or kWh) you use, plus a daily

standing charge, which you pay whether

you use any energy or not.

Anyone on a fixed-term deal will

continue to pay the same price per unit

they paid before, but because the

wholesale price of gas (and electricity

made from it) has risen steeply in the

past year due to supply issues and the

war in Ukraine, getting a new fixed deal

is becoming more expensive.

This has made the default tariff the

cheapest deal, so more people are

moving to it when their fixed deals end.

Ofgem caps how much suppliers can

charge on this tariff — it is at present

28.34p/kWh for electricity (up from

20.8p before April) and 7.37p/kWh (up

from 4.1p). The standing charge is 45p a

day (up from 25p) for electricity and 27p

(up from 26p) a day for gas.

Ofgem has reviewed this cap twice a

year since it was introduced in 2019 to

reflect changes in wholesale energy

prices. However, in May it announced

plans to review the cap every three

months.

This means that price rises, or falls,

could be passed on faster in future if the

changes go ahead.

Tom Edwards, a senior modeller at

Cornwall Insight, an energy market

analyst, said that although he expects

the cap to fall slightly to somewhere

between £2,600 and £2,700 in spring

2023, prices are expected to remain high

for some time.

“Our modelling shows that pre-2021

prices are not making a comeback this

decade and likely beyond,” Edwards said.

Should I fix now?

Fixed-rate deals let you lock in prices for

a set period of time, but as they have

become more expensive than the default

tariff there is currently no benefit to

switching to one.

However this may change if the price

cap rises by to about £2,880 as expected

in October for a typical household. If

you are on the default tariff and can find

a fixed deal now that is less than the

price cap is likely to be in October, it

could be worth switching.

Ovo Energy has a one-year fixed deal

that’s 38.5 per cent more than the price

cap, at £2,731 a year for a typical

household. That means you would pay

about £63 a month more than on the

default tariff between now and October

if you switched, and save about £12 a

month from then on. You could save

more if the cap rises again in January or

April. Check with your supplier first

because deals for existing customers,

which are not advertised, can be better.

It all comes down to checking what

deal you can get, as you could overpay

by more before October than you will

save after. Keep an eye out for cheaper

fixes as it gets closer to October.

Prices will rise again in October but there are ways

you can cut costs, writes Rosie Murray-West

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*Estimated. Source: Ofgem, Cornwall Insight

What to expect

Average annual bill for a typical

household on a default tariff (set by

the Ofgem price cap)

Apr 2021

Apr 2022

Oct 2022 *

Jan 2023 *

£1,277

£1,971

£2,880

£2,907

Cost of living help — what you can get

The government has announced a

£21 billion package to deal with the

cost-of-living crisis. You could qualify

for all of these:

6 £400 for all households. This is

applied as a discount to your bill by

your supplier from October. This is a

grant so will not have to be repaid.

6 £650 for people on means-tested

benefits. This includes those who

receive universal credit, jobseeker’s

allowance, income support, working

tax credit, child tax credit and pension

credit. It will be paid by the

government directly.

6 £300 extra for pensioners receiving

winter fuel payment.

6 £150 for those on disability benefits,

paid by the government directly.

There are other schemes for those who

are really struggling. These include the

£140 warm home discount for those on

a low income or who receive pension

credit. For more information and to

check your eligibility, see the guide on

fuel poverty at turn2us.org.uk.