Energy bills could rise by up to £900 for some households in April

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(Image credit: Getty Images)

The ongoing energy crisis has already seen record price rises and many UK suppliers have gone bust. Unfortunately though, new research suggests the situation is only going to get worse in 2022.

Since January 2021 the market price of gas has quadrupled, and it’s expected to carry on going up as we head further into winter and there’s more demand. As a result, energy sector experts believe this will be reflected in Ofgem’s next price cap, which the regulator will set in February and roll out in April.

Current estimates from the Tony Blair Institute for Global Change suggest that the cap for the average household could go from its current level of £1,277 a year, to as much as £1,800. What’s more, this would then mean energy bill increases of upwards of £900 for some UK homes when the new cap comes into force.  

The biggest rises will be for those on expiring fixed tariffs

These staggering forecasts from the Institute are based on the typical energy use of a household, but the organisation believes the biggest rises will be for those on expiring fixed-rate tariffs in larger, poorly insulated properties.

That said, even those who are currently being protected from the record high prices on the existing price cap’s standard variable tariff will also face sizeable price rises, with bills doubling for many households.

Tim Lord, a senior fellow at the Tony Blair Institute offered his thoughts on these estimates:

"For customers who are on standard tariffs - which change and are generally closely aligned to the price cap - they will see a rise of between £450 and £650, if you believe what most analysts think is going to happen.

"For people who are switching from what were cheap fixed-price deals, which expire and go onto the price cap, they might be seeing a rise of between £700 and £900."

Government intervention could help avoid these rises

In the report, Tim Lord also sent out a warning explaining how catastrophic this could be for millions in the UK and called on the government to step in and help reduce the potential severity of the increases:

"Unless the government can find a way of acting to address some of the impacts, in particular on people on the lowest incomes, I think it could cause genuine hardship. Already, people struggle to make ends meet, week to week and month to month."

Mr Lord went on to give three examples of government intervention which could help the situation:

  • Cutting VAT – by temporarily removing this tax from our energy bills, this would save around £85 per household, at a rough cost of £2.4bn to the Treasury.
  • Removing existing environmental and social costs – currently these are automatically added to our energy bills, removing them would save £175. Although it would affect a number of green initiatives.
  • Stopping covering supplier bailouts – rather than adding supplier bailouts to the new cap, these costs could be covered over a longer timeframe, meaning a smaller impact on our bills.

What can be done now to help save money?

The government’s response to these estimates was to reassure the public that the price cap won’t change before April, meaning we won’t see any surprise increases to the cost of our energy over the next few months. In addition, the spokesperson highlighted a number of schemes that are currently available that bill payers may wish to investigate to help them save on their energy costs:

"Protecting households’ bills across the UK has always been our absolute priority, which is why we have ensured the Energy Price Cap will remain in place this winter despite the rise in global gas prices.

"While we recognise the cap may rise in April, we continue to support those most in need through our £500m Household Support Fund, on top of other schemes like the Warm Home Discount and Winter Fuel Payments."

At the moment such schemes are worth considering, especially as running an energy comparison and switching supplier to a cheaper deal isn’t an option. This is because not even the best energy deals from the UK’s best energy suppliers can beat the price cap.

The only other courses of action that consumers can take is to look to save on your energy costs by reducing your consumption. Whether it’s through top energy saving tips like these, being smarter with how you use your devices and appliances or only using your heating when you need it, you could cut your energy use and bills.

At the same time, if you’re already struggling with these costs, you should speak to your supplier to try and work out a new repayment plan if you can.

Richard Hart

Rich is a freelance copywriter and content strategist with over 10 years' experience. His career has seen him work in-house and in various agencies, producing online and offline content marketing campaigns and copywriting for clients in the energy industry.