Energy bills will be going up tomorrow as the October price cap comes into effect, but the hike will not be as much as first planned.
From 1 October, the average energy bill will rise by 27% to £2,500 from £1,971 a year.
Gas and electricity prices have skyrocketed this year after supplies from Russia to the rest of the world were slashed in retaliation to the West’s support of Ukraine following the invasion of the country by Russia. Energy consumption also grew higher following the end of Covid-19 lockdowns.
Average bills were meant to go up to £3,549 from October, in line with wholesale prices, but prime minister Liz Truss slashed the price cap – with the government covering the £1,049 for each home – when she came into 10 Downing Street.
All homes will also receive a £400 support package – taking the annual price down to £2,100 – with pensioners receiving a further £300 and those on benefits also getting financial aid.
The price cap, which energy regulator Ofgem reviews four times a year, limits the cost households pay per unit of energy (kilowatt-hours).
People can expect to pay 34p for a kWh of electricity – up from 28p – and 10.3p for gas, rising by 3.3p.
UK natural gas futures soared nearly 50% to 380p a therm on Friday – the highest in a fortnight – on greater demand due to lower winds, Trading Economics said.
On 26 August, when the £3,549 threshold was announced, gas prices were trading at approximately 640p per therm – some 13 times more than before Russia invaded Ukraine.
Standard variable tariffs mean consumers can be charged the same price per unit as global wholesale costs but are limited by the government’s cap.
Fixed tariffs, meanwhile, are locked in for a year and agreed upon annually.
Consumers on an expensive fixed tariff can take a meter reading before 1 October to make sure their energy company honours the price guarantee discount, Sky News reported.
Usually, businesses are not covered by the price cap, but Truss has unveiled an “energy bill relief” scheme to help firms.