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Why rising energy bills will ravage your income much more than you think

·4-min read
Energy Bills Crisis Price Cap Cost of Living Winter
Energy Bills Crisis Price Cap Cost of Living Winter

Britain is braced for an energy price disaster this winter. Average bills are about to soar by thousands of pounds a year and more than half of us will be thrust into fuel poverty.

But how much will the use of everyday appliances actually cost you? And is there anything you can really do to avoid paying through the roof?

Telegraph Money’s analysis shows, in pounds and pence, how much everything from heating your home to running the dishwasher will cost when prices peak.

From October, the average annual household energy bill is expected to surge by 81pc due to Russia’s war on Ukraine and huge demand for a limited supply of gas.

Energy watchdog Ofgem is expected to confirm its new price cap on bills on Friday, but experts have forecast it will mean the typical household has to pay £3,582 a year for their power.

It is thought the cost of using gas to heat a four-bedroom home to a room temperature of between 20.5C and 21.5C will soon rise to £3,105 a year under the October price cap, according to supplier Octopus Energy. This is compared to the current cost of around £1,716.

It means the bulk of the new sky-high energy bills will come from heating rather than use of kitchen and washing appliances, VAT and standing charges.

Looking at the running costs for 11 household appliances, our analysis suggests households will spend £232 more on cooking and cleaning appliances in the three months from October. If prices continue to rise, the same appliances may cost £613 to run in the first three months of next year – nearly twice what they cost now.

Under the forecast for this winter’s price cap, a tumble dryer will cost £1.15 to run, a washing machine £1.53 and a dishwasher 77p, according to analysis by Utility Warehouse.

It means a family of four who use their dishwasher once a day can expect to spend £31.74 more than they do now. Should that same family each shower for five minutes twice a day, their bills will increase by £147.20 from October.

Under today’s prices, a typical gas oven costs about 62p to heat for an hour; come October, that will have almost doubled to £1.12. This means roasting a 12lb turkey on Christmas Day will cost £3.36.

Under the current price cap, a kettle costs around 4p to boil. Assuming you boil a kettle three times a day, it will cost you £17.66 under the first three months of the new price cap. Lights and desktop PCs, meanwhile, use a negligible amount of energy.

The price cap is due to be revised again before January, following a decision by Ofgem to review the cap every three months instead of six. Analysts have forecast this will drag the average bill to more than £4,000.

National Energy Action, a charity, has called on the Government to upgrade the energy bill support package to reflect new forecasts and sufficiently protect the poorest households this winter, while making a “concerted” effort to improve the energy efficiency of homes and push bills down.

Peter Smith, of the charity, said: “People should certainly be aware of how much they’re spending running household appliances so that they can try to use less. But no amount of penny-pinching and energy saving tips are going to solve this crisis.”

Bill Bullen, of Utilita Energy, a supplier, said price increases would mean even households with enough money not to have been concerned with their usage will have to make changes.

But he warned that “for households who were already doing everything they could to cut their energy costs, these latest price rises will mean even more fuel stress, which no one should be forced to face”.

The price cap limits the rate at which providers can charge customers for their energy usage on a standard variable tariff. The cap is split across various different components, but the factors directly affecting consumers are the standing charges and unit rates for gas and electricity.

Standing charges are billed to consumers at a daily rate – regardless of how much energy they use – and cover the providers’ maintenance costs, as well as the administrative costs of moving customers from failed providers. For gas, this is 27p a day, and for electricity, it is 45p.

Currently the unit rate for electricity, which dictates how much money you spend using appliances, is capped at 29p per kWh, while for gas it is 7p.

The cap on rates also varies by region. If you live in the South West, where electricity is more costly to transport, you will likely be charged more than someone who lives in London.

When Ofgem announced the April price cap, the average annual estimated household bill rose by 54pc – to £1,971. In January, when the cap goes up again, the average annual household energy bill is estimated to rise to £4,266, an increase of 117pc from April.