Yahoo Finance Energy bills: What to expect this winter
After months of bad news about energy bills, things have started looking up. We saw prices fall in July, and then we heard that in October they’re going to do so again. Unfortunately, that’s not the full story.
It’s true that the energy price cap is £2,074, and that in October it will fall again, to £1,923. However, millions of people will end up paying higher energy bills than they did last winter because of two key changes.
The first part of the problem is that the price cap relates to the price per unit of energy, and on top of that is the daily "standing charge", which you’ll pay regardless of how much energy you use.
That standing charge is going up to reflect the increased cost of doing business, and gets passed on to all of us. It’s not a massive hike, but every penny counts.
On top of that is the fact that last winter we all got lump sum payments to help with the cost of energy – of £400. This year there are separate cost of living payments for people on low incomes, those with disabilities and pensioners, but no overall payment to help with energy bills.
Read more: One in three UK households 'will pay higher energy bills' this winter
The combination of these two things means that those who use the least energy will actually end up paying more than they did last winter — specifically those who use less than 79% of the average.
Think tank Resolution Foundation calculated this means 2.7 million households will have bills at least £100 more than the same time a year ago.
Even if your energy costs drop in October, you’re not in the clear, because they’re forecast to go back up again in January to £2,033.
From there, more drops are forecast, followed by more rises, but once you get too far down the track, the forecasting becomes more of an art than a science.
And all this needs to be seen in the context of where energy prices were before all this kicked off. Two years ago, back in October 2021, the price cap was £1,277. So this October the cap is £54 higher per month.
Read more: House prices: Is it better to rent than buy?
Energy prices have risen to phenomenal levels, and the fact they’re now lower than the peak doesn’t mean they’ve fallen back to anything manageable. Right now, 46% of people say that paying their energy bill is either difficult or very difficult, according to research by Hargreaves Lansdown.
Given that this winter is forecast to be even colder than usual, it means we’re going to need to call on every energy saving trick we learned last year — and go back to making tough decisions about how warm we really need to be.
It seems that anyone waiting for some really good news about energy bills still has a long, cold wait ahead of them.
Sarah Coles is a personal finance analyst at Hargreaves Lansdown and co-presents Switch Your Money On podcast.
Watch: Energy bills to rise for many despite reduction in price cap, experts warn
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