The Times - UK (2022-06-11)

(Antfer) #1

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


n
ive

a £4
cost
the
to
au

fo
w
w
he
I
mar
Reg
cap
issu
D

s


*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.
Free download pdf