It has been announced that an energy price cap increase will come into force, raising energy prices by a crippling 54%. This means energy customers on variable tariffs will see an average rise of £693 per year, taking their annual energy bills to nearly £2,000. The average increase will be £708 a year for those on prepayment meters.
The increases are set to come into effect in April. As a result, the millions of households already struggling with rising costs face a further financial burden.
The sharp increase coupled with rising interest rates and living costs has prompted calls for swift action. Chancellor Rishi Sunak responded by announcing a financial package of £350 for households which will include money off energy bills coupled with plans for council tax rebates. However, despite these promises, many are now left worrying about how they will afford to pay their bills.
In addition to the enormous increase set to come into force in April, a further increase in energy costs is expected in October this year. With the interest rate increase to 0.5% announced on the same day, families could see living standards fall to their lowest levels in 30 years.
Huge financial pressure on millions of households
With inflation soaring, living costs such as food continuing to rise, interest rates being hiked, and energy prices rocketing, millions of families now face enormous financial pressures.
While wages are rising, officials have said that this is nowhere near fast enough to cope with the substantial payment increases that households face.
Following the announcement of the energy hikes, Ofgem chief executive Jonathan Brearley said: "We know this rise will be extremely worrying for many people, especially those who are struggling to make ends meet, and Ofgem will ensure energy companies support their customers in any way they can.”
He added: "The energy market has faced a huge challenge due to the unprecedented increase in global gas prices, a once in a 30-year event, and Ofgem's role as energy regulator is to ensure that, under the price cap, energy companies can only charge a fair price based on the true cost of supplying electricity and gas.”
In the meantime, the government has said that it plans to put together a variety of support to assist struggling households. Most households will be eligible to get the £150 council tax rebate in April, and millions will be eligible for £200 off energy bills. There are also plans to expand the Warm Homes Discount to make more people eligible.
However, it has been revealed that while the Chancellor claims the £350 per household support package will help millions, £200 of this will have to be repaid over five years starting from next year. The only part that does not have to be repaid is the £150 council tax rebate.
Melissa Shaw from Skinny Spending told us: "The rising energy prices are of huge concern and the government's £350 support package is not going to make enough of a difference for many households who are seeing an average increase of more than double this. In the meantime, one way to save on energy costs is to reduce your thermostat gradually. Trying to make a drastic change that only lasts a short while will not be as cost-effective as reducing your heating by one degree permanently."