UK Households Set to Pay More On Energy This Winter Despite Price Cap Cut

    On 25th August, energy regulator Ofgem lowered its price cap on household energy bills by about 7% for the last quarter of 2023. From October 1st, the reduced price cap level will be at £1,923 a year—down from the current level of £2,073 for a typical dual-fuel household.

    However, a third of households in the UK will still face hefty energy bills in the upcoming winter compared to last year. Citing an analysis by the Resolution Foundation, Mail Online reports that even though the cost of per unit energy is coming down, 35% of homes—affecting around 7.2 million people—in the country will need to spend more on energy this winter.

    According to a study by Citizens Advice, the average monthly energy bill will soar by at least £32.33 between January and March 2024, compared to the energy price households paid during the same period in 2023. 

    Gas and electricity bills increase due to two main factors. First, there is a rise in standing charges, which is a fixed fee for all energy users. Second, there is no government support discount of £400. Despite the fact that the price per unit of energy is decreasing, these factors contribute to the overall increase in bills.

    Wholesale gas and electricity costs reached record highs in Europe and the UK last year due to the Ukrainian invasion worsening the global energy supply chain chaos.

    Now that the losses are being recovered, and the wholesale energy costs have significantly come down, Ofgem has made reductions in the price cap. But, it’s important to note that market volatility persists despite recent cuts in wholesale prices for gas and electricity by 85% and 80%, respectively, compared to last year’s record highs. The current price cap, although lower than its peak, remains 60% higher than it was two years ago, indicating the continued challenges faced by consumers.

    In such a situation, different organisations such as the End Fuel Poverty Coalition, National Energy Action, and Citizens Advice, have called for a social tariff.

    Urging “direct government intervention” through “bill support, social tariffs and energy efficiency” National Energy Action, in a statement said, “For a third straight winter, vulnerable households will face stubbornly high bills and an increasing energy debt mountain. This winter there is no price guarantee and no £400 Energy Bills Support Scheme.

    “The absence of targeted further financial support this winter to reduce the energy bills of the most vulnerable will mean millions of unheated homes and spiralling debt. It will add to the queues of people for the NHS and for the overstretched resources of charities like National Energy Action. The UK Government can still act—by directly reducing energy bills via targeted energy discounts or a more targeted Energy Price Guarantee for low-income and vulnerable households.”

    However, Andrew Bowie, Parliamentary Under Secretary of State (Minister for Nuclear and Networks) at the Department for Energy Security and Net Zero, when asked about the possibility of a social tariff, refrained from confirming if it was under consideration.

    Households are urged to sort out their homes’ energy efficiency before the winter sets in to keep their energy bills in check. Besides keeping energy consumption reasonably in check, consumers can invest in home insulation and get their boilers serviced. Periodic servicing of boilers with high-end services such as Mulgas ensures the system works optimally, thus slashing a significant amount off of the energy bill. 

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