Households across the UK are bracing themselves for a major squeeze on their budgets when the much-publicised energy price cap increase comes into effect on April 1st.
Against a background of spiralling wholesale prices across the globe, the UK energy watchdog Ofgem has been forced to put its consumer price cap up by a record 54%. The price cap is the maximum an energy company is allowed to charge on a default tariff.
For default tariffs paid by direct debit, the increase means the ceiling on bills will rise from £1,277 to £1,971 per year. The figures are slightly higher for prepayment meters.
If you’re on a fixed tariff or a standard variable green tariff that Ofgem has exempted from the price cap, you won’t see an immediate impact. Still, Ofgem expects some 22 million customers to be hit by sharp rises in their gas and electricity bills.
Energy companies have for many months now been refusing fixed tariff plans to new customers, or putting their rates up sky high to reflect increased wholesale costs. Anyone who has moved supplier because of the large number of insolvencies triggered by spiralling wholesale costs is automatically on a default tariff.
Against a backdrop of rising living costs across the board, there are concerns that the hike in energy costs will cause widespread financial stress. If you are worried about not being able to pay your energy bills going forward, here’s what you need to know.
Supplier assistance
Ofgem rules mean that energy companies are obliged to offer support to customers who are struggling with their bills and offer payment plans that they can afford. If you find yourself in difficulty, speak with your provider. You are entitled to ask for measures including payment breaks, reductions and extended time to pay. If you have a prepayment meter, you can ask for emergency credit to avoid going without heating and electricity.
Many suppliers also offer hardship grants to those most in need.
Benefits and other government aid
The government has announced a range of measures to support households with increased energy costs. The headlines include a £200 energy bill discount for all customers in autumn 2022, a £150 council tax rebate and a £144 million discretionary fund given to local councils to help those in most need.
The government also has a number of long-running schemes aimed at helping people on low incomes with increased energy costs through the winter. This includes the Warm Home Discount for people who receive Pension Credit and/or a small number of means-tested low income benefits.
Anyone aged over 65 can also apply for the Winter Fuel Payment, a one-off subsidy of between £100 and £300 for winter energy costs. More widely available is the Cold Weather Payment, which automatically gives low-income households in receipt of a wide range of benefits a weekly payment of £25 if temperatures drop below freezing.
Managing debts
A sharp and sudden rise in living costs such as that we are now seeing with energy prices is bound to exacerbate existing financial difficulties. If you are living under a heavy burden of personal debt, you are much more likely to face difficulties paying higher energy bills.
If you are worried that existing debt repayments don’t leave you any room to pay higher energy bills, you should take advice on debt consolidation or relief. Options range from informal debt management plans that seek to reduce how much of your outgoings are tied up in debt repayments at any one time, to more formal agreements with creditors such as Individual Voluntary Arrangements (IVAs) and Debt Relief Orders.
Anyone struggling to pay a personal debt can now also legally request up to 60 days’ respite from payments under the so-called ‘Breathing Space’ scheme launched by the government in 2020.
For free, 100% confidential advice on managing personal debt and taking back control of your finances, talk to one of our experts today.
