Energy bills could hit £3,000
The UK’s energy crisis is still ongoing, with experts now forecasting bills to rise by up to £900 in the winter. This would take the average annual energy bill to an eye-watering £3,000.
Keith Anderson, CEO of Scottish Power, is one of many who are vocal about this situation. He has warned the government must take “urgent action” to support households or risk more households falling into fuel poverty.
“Given what’s going to happen in October, we think that urgent action is required to put in place a mechanism to support customers through this period,” he said. “You require a sum of about £1,000 to start bringing bills back closer not to where they used to be, but closer to where it’s realistic to expect people to be able to pay them.”
The energy crisis explained
Before getting into the forecasted bill rise, it is worth talking about what the energy crisis is and what has caused it. Starting back in late 2021, the UK’s energy crisis came about as a result of a few unexpected global issues rising up around the same time. Below are a some of the most prominent ones:
- Lockdown restrictions easing up globally, causing an increase in the demand for energy.
- Asia having a large demand for liquified natural gas (LNG), meaning there was less LNG shipments to Europe.
- A long and prolonged cold winter over 2020 – 2021 drained natural gas storages and created shortages across Europe.
- A reduction in renewable energy generation as a result of low winds.
Due to these problems occurring around the same time, it was the perfect storm to cause wholesale energy prices to increase drastically. It is for this reason many energy suppliers had gone bust late last year as their profit margins were simply too small to continue business. Energy suppliers could not transfer the increased wholesale prices onto the consumer due to the energy price cap.
Though the problems highlighted above occurred last year, the UK’s energy crisis is continuing to happen as more recent events such as the Ukraine crisis has caused wholesale energy prices to become even more volatile.
What this means for households
If the average annual bill does end up rising to £3,000 annually, this would be the highest the energy price cap has even been since its introduction back in 2019.
CEO of Scottish Power Keith Anderson warns that when the new price cap is announced in October: “It will hit incredibly hard and immediately.
"If nothing else happens by October, I think we will see a huge increase in pre-payment customers in effect self disconnecting – not re-loading their pre-payment meter because they can’t afford to do it.
“We will also see a massive increase in debt levels for direct debit customers and a massive increase in people being pushed from direct debits to prepayment meters so that companies can recover the debt.
Having to pay more in energy bills annually means more and more people will fall into fuel poverty. This is not a good sign as last year an independent think-tank forecasted the number of people in fuel poverty with treble as a result of the April 1 price cap alone.
New changes to be aware of
It is worth noting that Ofgem, the UKs energy regulator, has made a few changes recently and they are well worth being aware of.
The first is that Ofgem has proposed that the energy price cap could be reviewed every quarter rather than twice a year. Ofgem say this is so price drops can be passed on more quickly to customers, but in reality, it’ll more likely mean customers are forced to pay higher prices more often.
There have also been changes to ‘market stabilisation’, where if wholesale prices fall by 10% and an energy company get a new switcher, they must pay that switcher’s old supplier 85% of the price difference. Ofgem say this is stop a situation where loads of energy companies come onto the market but then go bust due to their rates being cheap, but you could also argue that this will hamper competition.
Though this may not be the best of news, worry not as there is always help out there! We have complied a few things you can do to support yourself and/or your families if things start to get a bit more expensive.
- The Winter Fuel Payment is tax-free, one-off payment given by the government to the elderly to help them pay for their energy bills in the winter. The payment will vary between £100 - £300 depending on your personal circumstances.
- The Warm House Discount is a one-off discount given by the government to help low-income households pay for their energy bills.
- The Cold Winter Payment is a government special fund to help those most vulnerable pay for their energy bills in the winter.
- Fuel Direct is a scheme given by the government that allows you to pay off energy debt directly from any benefit you receive. This is to help with reducing any further poverty or debt.
Also here are some things you can do to save some money on your energy bills:
- Switch off any electric appliances not in use can. You can save up to £55!
- Draught-proof all windows and doors as heat can escape through gaps around the house. This can cost you around £200 a year!
- Turn off any lights not in use which can save you up to £20 a year. You can even look into LED lights for even more savings.
For more ideas on how to save money on your energy bills – click here
Click here to run an energy price comparison, and see if you could be paying less for your gas and electricity.