Energy bills are set to remain high despite the price ceiling cut

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By Kevin Beachy and Nick Edsir, BBC News, May 25, 2023

Updated 25 minutes ago

Image source, Getty Images

Experts have warned that energy bills will remain high despite the price drop in July.

The average household will pay £2,074 a year for gas and electricity from July, down from £426 a year, after the regulator lowered energy price caps in England, Scotland and Wales.

Government aid in recent months has limited the bills to £2,500.

However, prices are not expected to fall much more during the remainder of the year, and can rise in the winter.

Martin Lewis of MoneySavingExpert said that later in 2023 the bills will be the same as last winter because although rates are cheaper, households will not receive the same £400 rebate from the government they received previously.

“People will continue to pay twice as much as they did before the energy crisis,” he added.

Kate Mulvaney, of energy analysis firm Cornwall Insight, said further significant drops in bills would be unlikely especially if there was a cold winter across Europe as the UK competed to buy energy with other countries.

“Our predictions are that until the end of this decade there will be higher and more volatile prices, and that includes the impact on domestic bills unfortunately,” she told the BBC’s Today programme.

And earlier this week, Qatar’s energy minister warned that “the worst is yet to come” regarding gas shortages in Europe, suggesting prices could rise again.

In an interview with Sky News, councilor Jeremy Hunt was asked if he would take action to support households if energy bills started to rise again.

He said the government’s actions over the past few months showed it was “willing to do what it takes”.

“We are well aware of the pressures families are facing, and we want to do what we can to support them,” he said.

There are hopes that lowering the price cap below the level guaranteed by the government will lead to a return of competition in the market, so that people will be able to shop around for the best deal.

But Lewis said he doesn’t expect to see companies announce new offers right away, with energy companies instead making offers tailored to existing customers, with no new deals around the market.

Ofgem energy regulator chief Jonathan Brearley has urged people to contact their supplier if they are struggling to pay their bills.

“In the medium term, it is unlikely that we will see prices return to levels seen before the energy crisis,” he added.

photo caption,

Michael Houghton is worried he’ll struggle again with the bills this winter

Michael Hutton says Emmaus Charity in Ipswich helped him apply for grants to pay his high energy bill last winter.

He says his gas bill has risen to nearly £30 a week, forcing him to cut back on food and entertainment purchases.

But Hutton says continued high prices are a long-term concern. Without more subsidies, he worries he won’t be able to pay his energy bills if he stays at a similar rate next winter.

Are you worried about covering the cost of energy bills? keep in touch:

Since 2019, Ofgem has set a price cap on energy bills. This is the maximum price suppliers can charge customers per unit of gas and electricity. It applies to households with variable or default tariffs in England, Wales and Scotland.

After the price ceiling rose, the government intervened by guaranteeing energy prices.

As of October the average household’s annual gas and electric bill is £2,500 but this will come to an end at the end of June. The £400 discount on everyone’s energy bills, given by the government over the winter, ended in April.

Under the new cap, unit price for electricity is 30p per kWh, with flat charging at 53p per day. The gas unit rate is 8p per kWh and the permanent charge is 29p per day.

Most homes do not use a typical amount of gas and electricity. The bills are based on how much energy a household actually uses, which depends on the number of people and the type and energy efficiency of the property.

Typical household accounts are based on a direct debit customer using 12,000 kilowatt-hours (kWh) of gas and 2,900 kWh of electricity annually. A kilowatt-hour is a unit of energy used to calculate your bill.

About 29 million households will be affected by the change to the cap, but there will be some differences to the typical payments from July

Those who pay by prepayment meter will pay a similar level to direct debit at £2,077 per annum. Those who pay by cash, check or bank transfer, usually every three months, will have to pay more, with a maximum rate of £2,211 per annum. In Northern Ireland, which is regulated separately, bills will be held at £1,950 per annum

Despite lowering the price cap, charity National Energy Action said 6.5 million people were still fuel poor. The typical July bill will still be much higher than in the winter of 2021 when it was £1,277 a year. Charity Citizens Advice called it “unaffordable for millions of people”.

Customers will still pay roughly the same amount for their energy as last winter, said Simon Francis, coordinator of the End Fuel Poverty Coalition.

“And after months of inflation and a broader cost-of-living crisis, people are becoming less able to afford higher energy bills,” he said.

Prime Minister Rishi Sunak said the price cap cut was a “milestone” in the government’s goal of halving inflation.

Inflation – the rate at which prices rise – has remained above 10% for months, although it fell to 8.7% in April. One of the main factors driving the price higher was the rise in energy prices after the Russian invasion of Ukraine.

However, Labor’s shadow climate change minister, Ed Miliband, said energy bills “remain staggeringly high, almost double what they were 18 months ago, and families and businesses across the country will continue to struggle to make ends meet”.

Here are some energy-saving ideas from ecologist Angela Terry, who founded One Home, a social enterprise that shares eco-friendly and money-saving tips.

Get a free energy-efficient shower head from your water company and use showers instead of baths: Consider loft insulation, which she says costs around £460 for a typical semi-detached house and can save £355 a year on gas bills Use a dryer, walk Instead of driving when possible, use windy days to get a feel for where the drafts are at home. It helps wetting the back of your hand to locate it, then use sealing tape or air seal, when available, press the smaller button to use less water to flush the toilet.

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