The energy bill freeze is set to conclude in April 2023, but the big question is, will we see a drop in our energy bills in 2023?
We’re living through an “unprecedented cost of living crisis”, which has hiked the price of food, petrol and, most concerning for UK households, energy bills. Market analysis from Cornwall Insights has predicted that without further government action typical energy bills could reach £3,700 a year by April 2023.
In another move the energy regulator Ofgem set the price cap at an annual rate of £4,279 for January 2023, but households will remain shielded by the government Energy Price Guarantee, which will keep annual average bills under this figure.
This, however, only limits the unit price of the energy, so this doesn’t mean you won’t see higher bills if you’re using more energy. This limit of unit prices will roughly equate to the following for the average household:
- Energy bills on average will sit at around £2,500 per year until April 2023.
- From April 2023 until the following April, households are expected to fork out around £3,000 per year on average.
This steep rise in energy prices is due to several mitigating factors, such as inflationary increases, the shortage of gas supply caused by the pandemic, and the Russian invasion of the Ukraine.
In this piece, we’ll be exploring what the future might hold for energy prices beyond April 2023 and what the chances are of an increase in costs.
What Can Expect From Energy Prices in 2023?
Ofgem has confirmed the energy price cap from the 1st of January 2023 to March 31st will be rising to an average annual cost of £4,279. This is a huge £730 increase from the £3,549 price cap introduced in October.
Fortunately, this price cap won’t impact households due to the energy price guarantee, which was introduced earlier this year, to protect households until April 2023 on the current £2,500 cap.
Of course, a ‘cap’ doesn’t mean you can use as much energy as you like, and the £2,500 limit is an average not the maximum amount you’ll be charged.
Once the Energy Price Guarantee ends, the average household energy bill will rise to £3,000 per year in April 2023, until April 2024. That’s an estimated increase of £500 a year for households, with the £400 energy discount also ending in March 2023.
Although this represents a huge hike for most households, it is lower than the original Cornwall Insight’s prediction of £3,700.
Specific unit prices for April 2023 haven’t yet been announced, but are likely to be revealed early in 2023.
What Will Happen to Fixed Rate Deals?
If you’re locked into a fixed tariff, you should still continue to receive the energy price guarantee until April.
However, if you’ve managed to secure a decent, low rate previously then it’s best to stick with it for now, since it’s not likely you’ll find a better deal elsewhere at the moment.
Why Are Energy Prices Soaring?
Image from BBC
There are few factors contributing to the soaring energy costs, but one of the main reasons is the Russian squeeze on sending gas supplies to Europe.
The UK relied on Russia for a small fraction of its gas, before the Ukraine invasion. However, Russia manages the pipeline connected to Europe and around 40% of the continent relies on Russian gas supply.
This means British energy suppliers are required to pay similar prices for their energy units as the rest of Europe.
British households are also at a disadvantage since most homes (85%) are heated by gas boilers, when compared to significantly fewer homes in France and Germany (50%) and the fact that 40% of the UK’s electricity comes from gas-fired power plants.
What Help Will Be Available?
The energy price guarantee won’t impact the £400 energy grant that every household was given to every household in October, this may have been applied to your credit with your energy supplier.
While the £400 will help households during the coldest months of the year until March, from April, as mentioned, the cost cap will increase and we know that while the energy price guarantee will continue, it will be scaled back significantly – we don’t yet know how this might look.
Most energy suppliers have support lines to help any customers struggling with payments. These may include debt write-offs and grants for those that are really feeling the pinch.
In most cases, you need to be an existing customer to access help, with the notable exception of the British Gas Energy Trust which is offering grants of £1,000 or more to help struggling customers no matter their supplier.
If you find yourself struggling, it’s important to contact your supplier as soon as you can to arrange a payment plan to suit you. Before calling ensure you have all the information you need, such as account numbers, up to date energy readings, and household incomings and outgoings to ensure you can reach the right person to help you quickly and efficiently.
If you’d like any more advice about what we’ve covered in this blog, or you’d like to learn about any of our other products or solutions, then why not contact us today for more information?