Energy bills will rise tomorrow as the October price cap comes into effect, but the rise won’t be as big as expected.
From October 1, the average energy bill will rise by 27% to £2,500 from £1,971 a year.
Gas and electricity prices have soared this year after supplies from Russia to the rest of the world were cut in retaliation for Western support for Ukraine following the country’s invasion by the Russia. Energy consumption also increased after the end of the confinements linked to Covid-19.
Average bills were expected to reach £3,549 from October, in line with wholesale prices, but Prime Minister Liz Truss reduced the price cap – with the government covering the £1,049 for each house – when she arrived at the 10 Downing Street.
All households will also receive a £400 support package – bringing the annual price down to £2,100 – with pensioners receiving an additional £300 and benefit recipients also receiving financial assistance.
The price cap, which energy regulator Ofgem reviews four times a year, limits the cost households pay per unit of energy (kilowatt-hour).
People can expect to pay 34p for a kWh of electricity – up from 28p – and 10.3p for gas, up from 3.3p.
UK natural gas futures soared nearly 50% to 380p per therm on Friday – the highest in a fortnight – on stronger demand due to weaker winds, Trading Economics said. .
On August 26, when the £3,549 threshold was announced, gas prices were trading at around 640 pence per therm, 13 times higher than before Russia invaded Ukraine.
Standard variable rates mean that consumers can be charged the same unit price as global wholesale costs, but are limited by the government cap.
Fixed tariffs, on the other hand, are locked in for one year and agreed annually.
Consumers with an expensive fixed tariff can take a meter reading before October 1 to ensure their energy company meets the price guarantee reduction, Sky News reported.
Usually, businesses aren’t covered by the price cap, but Truss has unveiled an “energy bill relief” program to help businesses.