Energy bills to rise a sickening 80% from October – Martin Lewis's reaction and how much you'll pay under the new price cap rates
Energy bills will rise by about £1,600/year on average for 24 million households in October, as regulator Ofgem confirmed the largest ever hike to the energy price cap this morning. We've been warning for months this catastrophic rise was coming, and now we know how bad it'll be. Here's what you need to know – including what you'll pay under the new rates and whether it's worth fixing.
The 80% increase is due to Ofgem raising the price cap on standard and default tariffs from £1,971/year for a typical user paying by direct debit to £3,549/year from Saturday 1 October, amid record wholesale costs (which firms pay). And with suppliers typically pricing their standard tariffs within a pound of the cap, it will be a tough winter for many.
MoneySavingExpert.com founder Martin Lewis, commenting on today's announcement, said: "If we do not get further government intervention, on top of what was announced in May, lives will be lost this winter by too many people to think about, because of this unaffordable, terrible rise in energy bills."
Do bear in mind, the new cap level isn't the maximum anyone will pay. The price cap sets a limit on the rates you pay for each unit of gas and electricity, so if you use more, you'll pay more, use less, and you'll pay less. Under the new cap, the rates on average (it varies by region – see the regional variations) are about 14.8p per kilowatt hour (kWh) for gas, with a standing charge of 28.5p per day. For electricity, it's about 51.9p/kWh, with a standing charge of 46.4p per day.
New. How much you'll pay from October calculator
We've quickly built a new calculator to show how much extra you'll pay under the October price cap. See our 'What you'll pay after the price cap rises in October 2022' calculator for an estimate of how your bills could change.
Ofgem has also announced a £1,591/year increase to the cap for more than four million households on prepay tariffs – to £3,608/year for a typical household.
Shockingly, there's little you can do to avoid the increase, with no cheaper deals for switchers – even when compared with the new higher price cap level from October. However, with predictions that Ofgem will hike the price cap even higher in January and April, see Martin's Should you fix your energy? guide for full info on when it might be worth switching.
While there is a package of support from the Government, much more is needed. You can see full info on what's been confirmed, along with all other help available if you're facing difficulties, in our Struggling to pay energy bills? guide. For more info on the price cap, see our Price cap FAQs and Price cap rates guides.
There are no deals cheaper than the new price cap – but is it worth ditching a capped tariff for a fix?
Despite the massive hike to the energy price cap from October, right now there are no energy deals meaningfully cheaper than the price cap rate.
Yet there are deals cheaper than the predicted upcoming caps (it'll change every three months), so while you can't save against today's cap, or the new cap from October, there are some tariffs that are cheaper than the cap if we look over the next 12 months.
Based on current predictions, you'd have to find a fix that's no more than about 145% costlier than your current price-capped tariff.
We've updated Martin's full 'Should you fix your energy?' guide with the new info from today's announcement, so check that for our full analysis, including deals that fall within this percentage.
Struggling to pay your bill? There's additional help available
The massive upcoming hike to the price cap will pile the pressure on many households already struggling with the rising cost of living. While the Government has announced a range of support measures, these were set when the October price cap was predicted to rise to about £2,800/year. Rocketing wholesale costs have meant the cap has risen much more sharply than this, so existing measures will likely barely touch the sides for most.
If you are worried about paying your energy bills this winter – or you're already struggling – don't suffer in silence. There's lots of help out there. Your provider is required to help if you're falling behind on bills (usually by setting up a payment plan), many have charitable funds to help those in debt, and there are charities that give one-on-one advice. For more info, see our full Struggling with energy bills? guide.
How does the price cap work?
The price cap sets a limit on the maximum amount suppliers can charge customers on standard tariffs for each unit of gas and electricity they use, and sets a maximum daily standing charge (what you pay to have your home connected to the grid).
As the cap limits the price providers can charge for each unit of gas and electricity, if you use more energy, you'll pay more, use less and you'll pay less.
The headline figures you see quoted – of £3,549/year for those paying by direct debit and £3,608/year for prepayment – are based on what's known as a 'typical' household. This is set by Ofgem to help the energy industry compare tariffs, and is defined as someone using 12,000 kWh of gas and 2,900 kWh of electricity.
Ofgem has also recently changed the way the price cap works, meaning it will now change every three months, in October, January, April and July – previously it only changed twice a year, in April and October.
See our Price cap FAQs guide for full info on how it all works.
What does Ofgem say?
Jonathan Brearley, CEO of Ofgem, said: "We know the massive impact this price cap increase will have on households across Britain and the difficult decisions consumers will now have to make. I talk to customers regularly and I know that today's news will be very worrying for many.
"The price of energy has reached record levels driven by an aggressive economic act by the Russian state. They have slowly and deliberately turned off the gas supplies to Europe causing harm to our households, businesses and wider economy. Ofgem has no choice but to reflect these cost increases in the price cap.
"The Government support package is delivering help right now, but it's clear the new Prime Minister will need to act further to tackle the impact of the price rises that are coming in October and next year. We are working with ministers, consumer groups and industry on a set of options for the incoming Prime Minister that will require urgent action. The response will need to match the scale of the crisis we have before us. With the right support in place and with regulator, government, industry and consumers working together, we can find a way through this."