The Government has postponed the end of its support scheme for energy bills, giving us all welcome breathing space. Now is the time to make the most out of stored credit and switch energy providers, say energy saving experts.
June could bring yet another big change to our finances.
The energy price guarantee (EPG), which keeps households from feeling the full effect of higher wholesale energy prices, will stay at its current level before ending this summer.
While the EPG will no longer rise in April, as originally planned, now is no time to rest on our laurels. The monthly Cost of Living payments that were granted to every household to help with energy bills, will stop at the end of March.
Gareth Kloet, spokesman at comparison site Go Compare Energy, says that the increase will push up the average dual fuel energy bill from £2,500 to £3,000.
“Many people in the UK will already be paying over the odds for their energy, so thinking about a further 20% increase will be a bitter pill to swallow,” he says.
None of us can do much about the Government energy policy. But by understanding the guarantee and making changes to our usage, we can bring down our own costs and keep our finances on track.
How the EPG works
Energy prices have risen substantially due in large part to the war in Ukraine. The EPG protects domestic energy from some of these increases by guaranteeing that we will not be charged over a certain rate for our energy. The government picks up the bill for costs above these set levels.
Cost of living: How Vodafone can support you in 2023
From low-cost broadband and mobile plans, to getting the most out of your current package, here’s how you can make the most of being with Vodafone.
The EPG is usually expressed as an annual cost – at present it is described as a guarantee that bills will be £2,500 on average. But this figure refers to the energy used by an average home in a year. Your own bills may be higher or lower than this, depending on how much you used, even though the amount you are charged per unit has been capped.
What’s happening in Summer?
The Government has committed to keeping the energy guarantee until June 2023, so an average home will pay around £2,500 a year for its gas and electricity. This is an improvement over the original plan to raise the limits allowed by the EPG, which would’ve seen the annual energy bill for the average home rise to £3,000. That’s an increase of 20 percentage points.
The exact rates that we will pay from June have not yet been set, but it is likely that the unit price for both gas and electricity will rise, as well as the ‘standing charge’, a set amount that we all pay per day for gas and electricity.
Cost of living: How to keep your spending under control
Christmas may be long gone, but the bills keep flooding in and prices continue to rise. It might be time to put yourself on a financial detox and tighten that belt.
The £400 extra financial help we’ve all been receiving for our energy costs, mostly in monthly discounts from our suppliers, ends in March, so you will not receive any extra help with the increased costs.
What will happen if prices fall?
At the moment, the EPG protects us from high energy wholesale prices, but the cost of energy has been falling. This means that, even if the EPG is set at £3,000, we may end up paying less than this for our energy later in the year.
Cornwall Insight, the energy consultancy, predicts that prices will fall below the guarantee in the third quarter of this year. Its predicted figures for the price cap – a rate set by energy regulator Ofgem – suggest that rates will fall so that the average annual cost of gas and electricity will be £2,362 a year – below even the current guarantee. The energy price cap is set once a quarter and energy companies cannot charge more than it, but they can charge less.
If the cap falls, we could end up paying less for our energy than the guarantee, but there is no certainty that these predictions will be correct.
What should I do now?
It seems likely that we will all be paying more per unit for our energy bills sooner or later, so it makes sense to budget for this. But as Mr Kloet at GoCompare points out, the rise may coincide with warmer and drier weather.
Cost of living: How to build your financial resilience in 2023
From ensuring your loved ones are protected from sudden shocks with insurance, to earning interest on both savings and current account balances, we ask the experts how best to prepare for a financially volatile year.
“We will naturally use less energy,” he says, describing this as a “small saving grace”. But he suggests taking extra steps including providing regular meter readings to your energy provider to ensure that your bills are up-to-date.
Many of us will have used up any stored credit with our energy providers over the cold winter months. But even if you still are in credit, Mr Kloet suggests either keeping it with your energy provider or, if you ask for it back, putting it in a separate savings account to put towards your energy bill.
“Think about implementing any energy efficiency advice that you may have put off during the winter months. It’s easier to do lots of those things in the summer than in the winter time. For example, replacing windows and doors, boiler servicing or replacement, or flushing radiator systems to improve efficiency,” he adds.
If wholesale prices fall, you might also consider switching providers. At present there is little incentive to switch as every provider is charging the same amount due to the EPG.
Cost of living: Cut down on food waste to save money
As the cost of living soars, here are a few ways to eliminate waste in your kitchen and trim your supermarket bills.
But Kate Mulvaney, senior consultant at Cornwall Insight, predicts that there will be an increase in reasonably priced energy plans in the second half of this year, including fixed price products.
“If suppliers’ costs decrease and government-supported rates remain relatively high, it is likely we will see a significant revival in reasonably priced energy plans, with millions of households finally able to take advantage of the savings they have been missing out on for years,” she says.
The long-term view
While a fall in energy prices may provide some relief as the guarantee is stripped away, no-one is expecting prices to fall to very low levels any time soon. In fact, Cornwall Insight believes energy unit prices will rise again slightly in the final quarter of the year.
This means we should all be taking action now to increase the energy efficiency of our homes, and to ensure that we keep an eye on any competitive tariffs available.
Stay up-to-date with the very latest news from Vodafone by following us on Twitter and signing up for News Centre website notifications.
