UK energy bills are set to rise from this week when a new price cap is introduced. There are set to be sharp increases to standing charges, with the amount you’re charged varying depending on the region you live in.
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Standing charges set to increase
All bills include a standing charge – which is a fixed daily payment that covers the costs of supply and other levies, and this is the area that is set to increase. This is because local suppliers are going to move charges which used to be part of a consumer’s unit price for energy to the standing charge.
This is because the consumer’s unit price for energy has a limit on it, so by moving the costs to the standing charge, there are no limits as to how high the costs can get.
The standing charges are also going to reach the maximum level possible for each region, which will cause some places to see bigger jumps in comparison to others.
Standing charges have always varied depending on where you live, with the costs of supplying homes with power in more remote and rural areas being more. However, recent research from the BBC shows that the increases are going to vary disproportionately across Britain.
The average increase, which is said to be just under 20p a day, adds more than £71 a year onto electricity tariffs. But, in Northern and Southern Wales, Merseyside, the South West, the Midlands and Southern Scotland, the rise will add over £80 a year onto the bill. This is disproportionate when compared to London, who will see less than £30 added.
What does the data show?
For an idea on how disproportionately the changes are, the research below from Ofgem shows the price per day for Single Rate Electricity Meter from April 2022 by British region in order of the percentage change:
- London: up by 8p->31p, a 38% increase
- Eastern: up by 13p->36p, a 58% increase
- South East: up by 17p->40p, a 73% increase
- North West: up by 17p->40p, a 73% increase
- Southern: up by 18p->41p, an 80% increase
- Yorkshire: up by 21p->46p, an 81%increase
- North Scotland: up by 22p->48p, an 83% increase
- Northern: up by 21p->46p, an 85% increase
- East Midlands: up by 20p->43p, an 88% increase
- Midlands: up by 22p->46p, a 92% increase
- South Wales: up by 22p->46p, a 94% increase
- Southern Scotland: up by 24p->47p, a 100% increase
- South Western: up by 25p->49p, a 101% increase
- North Wales & Merseyside: up by 23p->45p, a 102% increase
Standing charges cover more than just maintenance, admin fees and government schemes, with the charges contributing to the costs of the 28 different energy suppliers which have gone bust since Autumn last year.
The costs of this are said to be equally spread throughout the company, however, the figures from Ofgem’s research does look to question how accurate this is.
Beyond this, households will need to prepare for an even bigger hit when the current energy price cap, which limits what consumers pay per unit of gas and electricity, also goes up this week.
Total UK energy bills set to increase
In total, UK energy bills could look to rise as high as £3,000 a year, with Russia’s invasion of Ukraine greatly contributing to the increase in prices of oil and gas.
Naturally, with the increases in energy prices, the UK’s cost of living is also going up. The rate of inflation rose at a 30-year high of 5.5% in January, with expectations it will rise above 7% with the introduction of the new pricing caps.
A government spokesperson said “It is hard to predict what longer-term impacts the current situation in Ukraine will have on energy costs. However, the energy price cap will continue to insulate millions of customers from volatile global gas prices.”
Can I afford this on a minimum wage income?
With bills constantly on the rise, it’s now harder than ever to own a home. A big concern at this time is whether a house is affordable to buy and own on a minimum wage income.
Go Compare have a tool that shows you the average salary you need to be able to buy a house in areas across the UK. Using this information, in most places it’s not possible to afford to buy a house on minimum wage.
On top of that, if you do manage to be able to buy a house, it’s not affordable to be able to pay the bills of a house on minimum wage. With energy bills looking to near an average of £250 a month, it’s not possible to be able to afford this, alongside mortgage payments, food bills, travel costs, and more on a minimum wage.
This pushes a large majority of people out of the housing market and means only a select number of the population can afford to buy and own a house whilst paying other ‘life bills’.
With these bill forecasts, most of the UK will be bracing themselves for what could be a dark and scary time. It remains to be seen as to whether or not the government will get involved and implement more policies and payments to help those suffering.
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Millie is a perfectionist with a passion for property and writing articles. You’ll find her researching the latest housing trends and the newest up and coming areas worth investing in. Read more about Millie here.