How to get help with rising energy costs
Wholesale energy prices have been fluctuating wildly these past few months. Although business energy rates have been volatile – some out of contract rates have risen by as much as 120% - domestic prices have been largely kept at bay due to the energy price cap.
The fluctuations in wholesale energy prices have caused several energy suppliers to go bust and threatens to push more families and individuals into fuel poverty. It’s an unprecedented situation and government support has been largely underwhelming, but here are some ways you might be able to save some money or get some back.
Why are energy prices rising?
A number of unexpected global issues have come about in the last few months and have all contributed to the rise in wholesale prices. The most prominent issues include:
The large demand from Asia for liquified natural gas (LNG), which meant that there was less LNG shipments to Europe.
The prolonged cold winter over 2020 – 2021 that drained natural gas storages and created shortages all across Europe.
Complications arising from the Nord Steam 2 pipelines, which has the capacity to send around 55 billion cubic meters of gas a year directly from Russia to Europe, and bypasses Ukraine (therefore the complication).
Lockdown restrictions easing up globally, causing an increase in the demand for energy.
And things could get even more complicated if the situation between Russia and Ukraine, with some experts suggesting an escalation could have ‘almost incalculable consequences for energy prices’ across the continent. But, to put it simply, the main reason we are in the midst the energy crisis is due to a simple lack of supply and an increase in demand. However, it is not just global issues that are affecting wholesale energy prices as the UK is also experiencing supply issues as well. Some of these issues include:
Low winds which meant a reduction in renewable energy generation.
A fire at a National Grid site in Kent which caused power cuts in cables that imports electricity from France. It is estimated that the power cables won’t be operational until 2023.
Low stockpile of gas as a result of the UK having some of the lowest gas reserves in Europe, meaning there is not much to rely on during difficult times like this.
How much has he energy price cap increased?
On February 3, it was announced that the price cap level will rise by £693, the highest it’s ever level since its introduction back in 2019. This would mean that from April 1, the cost of a SVT will be restricted to £1,917 per year, resulting in a 54% increase for the typical dual fuel direct debit customer.
The government has announced a series of measures to help households, but they’re far from comprehensive and will do little to alleviate the pressure on households.
A ‘loan’ to energy suppliers to enable them to cut £200 of everyone’s domestic energy bill. This will then be repaid in equal annual instalments of £40 over the next five years. This will cut energy bills this year but could see everyone paying increased rates and a £40 levy if energy prices don’t come down.
From April this year, households in council tax bands A to D will get a £150 rebate on their council tax. Local authorities will get a discretionary fund of £150 million to help lower-income households in higher council tax band properties, along with anyone in eligible band properties that are already exempt from paying council tax.
Eligibility for the Warm Home Discount has been expanded by a third to help 3 million more vulnerable households. £3 billion will be provided over the life of this parliament (at least until 2024) to help lower-income homes become more energy-efficient and save around £290 a year.
Anyone who is eligible for support at every level should see the best part of £500 knocked off their energy bills. This means they still need to find £193 to cover the rest of the increase, something that could prove impossible for those already struggling with high bills before the price cap increases.
Even with these plans in place, this is still a big hit on UK households and can still worryingly push families and individuals into fuel poverty. This is where a household spends more than 10% of its total income on fuel use. Low wages and high energy costs are the biggest drivers behind fuel poverty. With wages stagnating and energy prices going up, it is no surprise that independent think-tank Resolution Foundation estimates that the number of people living in fuel poverty will treble.
To make matters worse, there have been no measures introduced to help the millions of businesses across the UK. This means business owners could be getting hit twice by the high rates – on their business energy and domestic energy deals. If you’re in this situation, we can still find deals that can beat your commercial out of contract rates (remember, there’s no price cap on business energy).
To find out more, go to our business energy comparison page.
How to tackle high energy bills
If you’re feeling a bit overwhelmed by it all, you need to make sure you’re getting everything you’re entitled to. Below are a few things you can claim to support yourself or your family during these more difficult times.
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.
And you may well already have put every bit of energy saving advice into practice, but here’s a recap of some of the things you can do to save some money on your energy bills:
Switch off any electric appliances not in use can save you up to £55. Standby mode doesn’t count!
Draught-proof all windows and doors. It may not seem like it, but heat can escape through gaps around the house. This can cost you around £200 a year! The main culprits are usually windows, around door, and through chimneys.
Turn off any lights not in use. Saving you around £20 a year. You can even replace lights with LED bulbs for extra savings.
Reducing how many times you use the washing machine, and also reducing the temperature to a 30-degree cycle, can help you save around £28 a year.
Skip the tumble dryer for clothing racks instead. This could save you up to £55 a year.
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.