Millions of households will see their energy bills leap in October, as rising gas prices mean the energy price cap will increase. The rise comes just as winter begins, when everyone’s energy use spikes, and is the second hike this year. We explain how the price cap works, who will be hit and how to beat the hike.

WHAT IS THE ENERGY PRICE CAP?

The energy price cap was introduced by industry regulator Ofgem in a bid to stop soaring prices in the energy and gas market for those customers who don’t switch to cheaper tariffs. The rate changes twice a year, in April and October, and will rise or fall in line with how energy prices have moved in the previous six months.

WHO DOES IT AFFECT?

The price cap only impacts the bills of customers who are on their provider’s standard variable tariff. This is the rate you’ll fall onto once any fixed-rate deal you signed up to has ended, and is always more expensive. Often people don’t realise they have dropped onto this tariff and that they’re paying more than they need to. Ofgem estimates that 15 million people are on these standard or default tariffs.

HOW MUCH MORE WILL I PAY?

The average bill will rise by £139 a year for those customers who pay by direct debit, with an increase from £1,138 to £1,277. If you pay by cash or cheque then your bills will be even higher, by around £93. For those on prepayment meters the hike will be £153, from £1,156 to £1,309. This increase is intended to reflect the rising prices in the energy market, with Ofgem saying energy costs have risen by 50% over the past six months.

However, these figures are for the average household based on average consumption, and are based on someone having a dual gas and electricity tariff – so each customer will see a slightly different increase and a different annual bill, depending on how much energy they use.

The increase comes on top of a rise in February this year, when prices for direct debit customers rose by just under £100 and for pre-payment meter users rose by £87 – again reflecting rising prices after a fall last year.

HOW CAN I BEAT THE HIKE?

The first thing you need to do is look at a recent bill and check to see what tariff you’re on – if you’re on the standard variable or default rate you need to take action. The best way to reduce your bills is to shop around for a better deal and switch suppliers.

You can use an online comparison website to see how much you could save, with Ofgem estimating the average customer could save £100 at today’s rates by switching – which means an even bigger saving compared to when the energy price cap rise happens in October. All you’ll need is a recent energy bill so you know what your usual usage is and you can plug a few more details in online to see how much you could save.

However, some customers may be in debt to their provider, which can make switching a bit trickier. The good news is that if the debt is up to £500 on gas and up to £500 on electricity you can still switch providers, the new company will just take on that debt and you’ll repay them under a repayment plan.

If you don’t want to switch or you can’t then you should at least call your current supplier and ask for a better rate.

WHAT OTHER HELP IS AVAILABLE FOR MY ENERGY BILLS?

If you’re over the age of 66 on 26 September then you’ll be eligible for the Winter Fuel Payment, which gives you between £100 and £300 towards your energy bills – the amount varies depending on your age and living situation, but you can check out what you’ll get here. You usually don’t need to actively claim this, it will come to you automatically once you hit the right age.

Another option is the Warm Home Discount Scheme, which gives you £140 off your energy bills this winter and is paid directly to your energy provider. You’ll be eligible for this if you’re on certain pension credits or otherwise meet the low income criteria. Check out more information here. 

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