Energy bills rising as households count the cost of Iran conflict
Energy bills for households across the UK are set to rise once again as the conflict in Iran continues to disrupt oil and gas supplies and push up prices.
Regulator Ofgem announced this week it would raise its price cap - the maximum price that suppliers can charge customers in England, Scotland and Wales for each unit of gas and electricity they use by £60 per year.
This will take the annual bill to £1,723 for the average household using both electricity and gas.
The increase reflected higher wholesale gas prices as a result of the ongoing conflict in the Middle East. And it will come into effect just as households start to increase their energy usage to keep warm as winter draws in.
Simon Francis, coordinator of the End Fuel Poverty Coalition, said ministers should tax the ‘war windfalls’ of energy companies to help households.
He said: “Six months on from the outbreak of the conflict in February, energy firms have banked at least £6 billion in profits on their UK operations while the bosses of key firms have also seen the value of their personal shareholdings increase by millions
“The vast majority of the public think it is morally wrong for firms to profit from this crisis as energy bills surge again driven by the cost of every unit of gas increasing 27 per cent year on year.
“Ministers should tax the war windfalls and put the money to work helping households this winter, helping people to improve the energy efficiency of their homes and bringing about long-term reform to drive down the cost of energy.”
So what does the increase mean? And what can households do to keep their bills down?
What will the change mean for my energy bill?
The price cap increase takes effect from October 1 and customers will see a price increase of around 1% on their electricity bills, while gas bills are rising by 8%, largely because of higher wholesale gas prices as a result of the ongoing conflict in the Middle East.
The price cap does not limit a home’s total bills as people still pay for the amount of energy they use - so reducing the amount you use is the best way to keep bills down.
What is the Government doing to help?
The Government has said it will remove VAT from electricity bills from October 1 to March 31, 2027. Without this intervention, the headline price cap figure would have been around £45 higher for a typical household. People will still pay 5% VAT for gas, meaning some households might not see the full impact of the VAT reduction on electricity in their bill.
Are prices going to keep going up?
Unfortunately, early predictions suggest bills are going to rise by even more next year.
Analysts Cornwall Insight’s first forecast for January to March puts the cap at £1,872 a year, up 9% on October’s level. This would mean households could face a bigger squeeze on budgets as the colder weather arrives.
Can I do anything?
Currently, about 35% of household energy accounts – or 11 million – are on fixed tariffs and therefore unaffected by the rising price cap. Ofgem said households could make savings by choosing a fixed tariff, which are available at £100 or more below the October price cap.
How do I start the switching process?
Experts recommend looking for deals that are cheaper than the price cap, not longer than 12 months and without significant exit fees. People can use websites to compare gas and electricity unit rates and standing charges in their region, from a range of suppliers.
Price comparison site Uswitch said there are currently 17 fixed deals available that are below the new October price cap, with the cheapest about 10% lower.
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