UK energy price cap to hit £3,549

The stratospheric rise in energy is set to be a real-life nightmare before Christmas for consumers.

• Ofgem raises energy price cap to £3,549 from 1 October. This represents a rise of 80%, or £1,578 increase on the current price cap of £1,971.

Commenting, Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “The dizzying rise in the energy price cap from 1 October is set to be a real-life nightmare before Christmas for consumers.

“The new cap level means the typical household is set to pay almost £2,300 more on their annual energy bills than they did in October last year when the cap was set at £1,277. However, consumers will pay more or less than the headline energy price cap figure depending on how big and energy efficient their home is.

“No one is immune from the stratospheric rise in energy bills, but they are having a disproportionate impact on poorer families. We have already seen energy or eat dilemmas play out during the warmer summer months when the heating doesn’t come on often – if at all.

“The government’s existing cost of living support measures will not stretch far enough to shield the most vulnerable members of society from rising cost of seemingly all areas of expenditure. And there are not enough tools in the personal finance box of tips and hacks to shield low-income households within the context of this inflationary environment. The harsh reality is households already living on a shoestring are running out of options and face financial disaster without further intervention.

“However, the national conversation is now turning increasingly to further support packages, whether that’s from government or business. This week, British Gas Energy said it will donate 10% of its profits to help customers cope with soaring bills, and while there has been much debate about the impact of that, it is perhaps indicative of where the conversation is heading.

“But it’s still looking like it’s going to be a long and uncertain winter, and for those who can, building financial resilience is going to be the ultimate goal.”

Preparing for a bleak winter for personal finances ahead

Myron Jobson says: “With households set to be hit with bigger energy bills this winter, it is worth thinking ahead - despite the current warm weather. Any savings you can make now, while the heating is still off, will help you build up reserves for winter when you’ll really need it most. But that’s easier said than done in a cost-of-living crisis.

“Rather than making swingeing cuts to few areas of energy usage, making smaller cuts to across a broader range of energy consumption could be a more palatable way of cutting costs, but it is such a personal decision and it’s always easier said than done. Small changes can have a big impact on your energy bill. Avoiding excessive energy consumption is good for your wallet, but also good for the environment. 

“However, many people have already cut their energy use to the bare minimum and the elevated energy price cap rise is set to push more and more people into fuel poverty. If you're behind on your bills, contact your energy provider to ask for support. It is worth consulting a debt advice charity such as StepChange or Turn2Us and they will go through all your options.”