The average cost of heating and lighting a home has soared past £3,500 a year following an 80% hike in the energy price cap.
Energy regulator Ofgem has increased the price cap for gas and electricity customers on their providers’ default and variable tariffs.
The rise means the typical annual household energy bill will now be £3,549, up from £1,971 in April and £1,277 in the first three months of the year.
The move will impact an estimated 24 million households from 1 October 2022.
Consumers were also warned to brace themselves for further energy price hikes in January 2023. Ofgem recently increased the frequency with which it reviews the energy price cap to every three months, instead of every six.
Jonathan Brearley, CEO of Ofgem, said: “We know the massive impact this price cap increase will have on households across Britain and the difficult decisions consumers will now have to make.
“The government support package is delivering help right now, but it’s clear the new Prime Minister will need to act further to tackle the impact of the price rises that are coming in October and next year. The response will need to match the scale of the crisis we have before us.”
Chancellor Nadhim Zahawi said the government was looking at what support it could offer to help the most vulnerable.
Why is this happening?
A number of factors have combined to force energy prices higher.
The conflict in Ukraine led to the UK, EU and US putting restrictions on oil and gas imports from Russia, which previously accounted for 43% of the EU’s natural gas imports.
Meanwhile, demand for energy increased as a result of economic activity resuming after Covid-19 lockdowns. It also rose after a cold winter in Europe and a hot summer in Asia, where electricity is used to power air conditioning units.
The limits on the supply of energy, combined with high levels of demand, have pushed prices higher.
As a result, UK energy companies are having to pay a lot more for gas and electricity, and these higher costs are being passed on to households.
What can you do?
If you're worried about being able to afford your energy bills, or you're already struggling, make sure you claim any support that's available to you.
A number of the major energy companies offer grants to help people struggling with their fuel bills. British Gas offers up to £1,500 for individuals and families who are in energy debt, regardless of who their supplier is.
In March this year, the government announced that every household would have £400 cut from their energy bills. Low-income households, pensioners and people with disabilities will get up to £800 off.
Pensioners will receive an extra £300 Cost of Living Payment, while people with disabilities will receive £150.
Support is also available through the Household Support Fund and the Warm Home Discount Scheme.
For more advice see our Cost of living: help with energy bills guide.
If you're already struggling, contact your supplier as soon as possible.
Ofgem has rules that they must help you if you're falling behind. They should work with you to create an affordable payment plan.
You can also take steps to reduce your gas and electricity consumption. Try turning your thermostat down, taking shorter showers, draft-proofing your windows and doors, not using a tumble drier and turning off appliances left on standby mode.
How will energy bills impact the housing market?
The steep increase in energy bills, combined with other cost of living hikes and rising mortgage rates, is expected to lead to slower house price growth.
Our latest House Price Index found buyer demand was already starting to ease, although it still remains above the five-year average.
This slowdown is expected to continue for the rest of the year in the face of rising living costs and economic uncertainty.
Although high energy bills will hit consumers’ budgets, rising mortgage rates are expected to have a bigger impact on their decisions to move home.
Average mortgage rates for new borrowers taking out a two-year fixed rate deal have already doubled from less than 2% at the start of the year to 4% now.
The higher rates move above 4%, the greater the impact on the housing market is likely to be, although we don’t anticipate widespread house price falls.