Beating April’s Energy Price Hike
10th March 2022
The UK’s going through a true cost of living crisis right now, and the state of world affairs is only pouring further fuel on an already blazing fire. Inflation’s predicted to hit 8% in April, energy price rises are spiralling and tens of millions of British households are facing massive increases in the price of absolute essentials like heating their homes.
The key to weathering this kind of “perfect storm” of cost increases is to realise which price hikes you can control and which you can’t. Right now, for example, the UK’s looking at the following headline hikes:
- Water bill rises averaging 2% in England and Wales.
- Broadband and mobile charges rising by 5%-9%.
- A National Insurance hike of 1.25 percentage points.
- Council Tax bills going up by 3% for most.
- A massive 54% increase in energy bill costs.
So what can be done about all of this? Well, it all depends on your situation. Your National Insurance Contributions, naturally enough, are pretty much set in stone based on the kind of work you do. Water bills, on the other hand, can sometimes be cut considerably by having a water meter fitted. Broadband rates can sometimes be brought down by switching to a SIM-only deal or taking up sign-up incentives (although these don’t tend to last long).
Council Tax might seem like another cost you’ve got no control over, but that might not always be the case. A lot of people, it turns out, are actually overpaying Council Tax because they don’t realise they’re owed a reduced rate or are in the wrong band. If you live alone, have disabilities or are on a low income, then you might qualify for a special discounted rate. At the same time, thousands of people have already successfully challenged the band their homes have been placed in, knocking big chunks out of their Council Tax charges.
The biggest cost of living news at the moment, of course, is the rising energy price cap set by Ofgem. Let’s take a look at what’s actually going on here.
Why are energy prices rising?
The wholesale price of natural gas is rocketing – and has been for about a year. This is the price energy firms themselves pay for the gas they supply to you. World events like the global post-pandemic recovery period and, just recently, the invasion of Ukraine by Russia have driven that wholesale price sky-high. Suppliers have basically had to make a choice between big energy price hikes and going out of business – and a lot of them have collapsed altogether because the previous energy price caps stopped them from passing enough of their costs on to their customers.
How much will my energy prices increase?
Ofgem reviews the price cap twice a year, based on changes in the wholesale price of gas. After the 1st of April 2022, the cap’s ramping up by an enormous 54% to cope with those energy price rises. People on a fixed tariff won’t feel the pain of this until their fixed period ends, of course, but for everyone else, the impact’s going to be massive and virtually immediate. That includes:
- Everyone who never locked in a fixed tariff energy deal in the first place.
- Anyone whose fixed deal has expired without them locking in another one.
- The millions whose energy suppliers went under and who were transferred to another firm on a default tariff.
Overall, that’s an estimated 22 million UK households now looking at an energy price hike of 54% in April – with even more price rises expected in October. The estimated floating around at the moment generally average out to an increase of about £700 a year as of April, with more to follow when the price cap gets reviewed again later on. Worryingly, estimates of what October’s review has in store have reached as high as another 47% hike.
The main thing to realise in all this is that there really is no cap on your actual energy bill. All the price cap limits is the price suppliers can charge per unit of energy you use on a default or standard variable rate tariff, along with the standing charge you pay just for keeping the supply connected in the first place. Those standing charges are being forced up by a range of pressures as well, from the so-called “green levy” and the Warm Home Discount through to the cost of switching all those customers whose suppliers went bust to new firms. So, when we talk about a typical cost hike of £700 to about £1,971, that figure’s based on estimates of “average” use across the country.
That last point’s an important one. Everyone’s bills are going up in April, but they won’t all be going up by the exact same amount. There are ways to make sure your own rises are as low as possible, and they don’t necessarily mean making big lifestyle changes, or even switching suppliers. In fact, switching to another firm probably won’t help a lot, given that most are simply going to ramp up their prices as high as they’re allowed to. So let’s talk about the things you could be doing right now.
Moving to a fixed tariff
Unlike default or standard variable tariffs, fixed-rate energy deals aren’t covered by the energy price cap. That means there’s a bit of a balancing act to pull off here. Switching to a fixed tariff only works if your new rate works out better, obviously enough, but you’ve got to think about the timing, too. We’re looking at another potentially huge price cap increase later in the year, so any tariff offer you pick will need to keep that expected figure in mind. Based on the predictions of energy analyst Cornwall Insight, for example, money-saving expert Martin Lewis suggests it might be worth fixing your tariff if the rate’s no more than 25% or so above April’s price cap rise.
It’s also worth factoring in the amount of time left on your current fixed rate. If you switch too early, you could be sacrificing a lot of the benefit of your previous tariff, and it’s all too easy to feel pressured into jumping too quickly. Similarly, if you fix your tariff for too long, you could find yourself stuck paying over the odds if wholesale gas prices drop later.
Keeping your energy usage down
There are loads of ways of bringing down the amount of energy you’re using, and many of them are pretty simple. You can read our articles, 6 Easy Ways to Save on Gas and Electric Bills and Save Money with These 7 Simple Heating Bill Hacks for a full discussion of some of these techniques, but as a basic idea of what’s possible:
- Nudge your main thermostat down by one degree to save £85 or more.
- Stop heating empty rooms to save up to £75 a year.
- Insulate your home to save up to £225 a year.
- Switch to LED lighting to save £7 per bulb per year.
- Stop leaving devices and appliances on standby to save £35 a year.
No single measure – or even any combination of them, is going to fully protect you against energy price hikes and the rising cost of living. However, there are still things you can and should be doing to limit the worst of the damage and make the most of your money. As always, the very top item on your to-do list should be to claim back the overpaid tax HMRC owes you each year. With the cost of living exploding, this is the worst possible time to be leaving your cash in the taxman’s hands – and the very best moment to get it back where it belongs.
Use our calculator now to find out if you're owed a tax refund – the average refund comes to around £1000 per year.
You’re always better off with RIFT.