This Friday, we’ll know for certain just how much more our energy bills will be from October 1 when Ofgem announces the latest price cap figure.
The current cap, based on the average household’s energy use, is set at just under £2,000 a year, and we already have a pretty good idea of where it’s heading.
The most recent predictions by analysts Cornwall Insight suggest it will be £3,582 a year – that’s an 82% increase.
And it looks like we’ll see another hike not long after. New rules mean the price cap is now going to be reviewed every three months, with long range forecasts for January putting the cap at £4,200 a year.
One consultancy has estimated it could go as high as £5,000 in April 2023. The easiest way to assess the impact on your bank balance is to look at what this means for your direct debit.
These are calculated by splitting the annual cost into months so you pay a set amount all year, rather than more during high use winter months.
If the cap is as predicted, the average payment will jump from £164 a month right now to £299 a month in October. That is a shocking 244% increase from two years earlier and a whopping 180% more than we were all paying this time last year.
Worse is predicted, with perhaps a rise to £355 per month in the new year and maybe past £400 in the spring.
Compare those figures to the the average direct debit a year ago – just £95. And if you’d been on a fixed deal your bills would have been even lower.
Come January you could well be looking at a four-fold increase and having to find an extra £300 every month.
It’s an almost impossible task for those on the lowest incomes, a huge concern for middle-income households and not necessarily any easier for those better off (if you use more energy than the average household, your bills will be even higher.)
As it stands there will be £67 knocked off every bill from October for six months, totalling £400, via the Energy Bills Support Scheme.
Those on benefits will have been eligible for £650 worth of extra support, while there was £150 extra for people on disability benefits and the same for pensioners.
It’s a lot of money, but it’s not enough. Even if someone gets the full amount, already expensive bills will still go up. Of course, this could change.
We’re all hoping whoever is announced as the new PM in early September will rush through some extra support for households.
But we’ve no idea what form this will take, who will benefit and when, if at all. So prepare yourself not just for one increase, but prices staying high for the foreseeable future.
Andy’s Best Buys: £160 and 4% cashback on energy:
This might be the best time to get a Santander 123 Lite current account. The bank is offering a £160 switching bonus – the highest it has ever offered – and is doubling the cashback on energy bills for two months.
The switching deal is open to new and existing customers, as long as you’ve not had a switching bonus from the bank before.
You’ll need to set or switch two direct debits, check online banking and pay in £1,000 within 60 days. Do that and you’ll get the money within 90 days.
As ever, do read all the terms and conditions.
If you opt for the 123 Lite account you get cashback on your bills. There’s 1% back on council tax, phone, mobile and TV bills; 2% on gas and electricity and 3% on water bills.
Plus in September and October this year the money back on energy is doubled to 4%.
You have to pay a monthly £2 fee with this, but if all your bills are coming out of this account the cashback should add up to £5 to £8 a month profit, giving you at least another £60 over a year, if not more.
Bank Switch offers
Santander: £160
Halifax: £150
First Direct: £175
Nationwide: £100 to £125
Virgin Money: Up to £160 via cashback
For more details on these switch offers head to becleverwithyourcash.com/banks
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