What is all the fuss about?
Unless you've been living under a rock for the past few months, you've probably seen an endless stream of doom and gloom about the energy crisis, with prices for gas and electric set to soar in coming months. Even for those of us who have seen rising energy bills for years, it can still be daunting, and the huge amount of confusing information out there can be baffling. We've put together a handy quickfire guide to cover the basics.
What is the energy price cap?
A price cap that was introduced by Ofgem (the UK's Gas and Electric Markets regulator) in 2019 to limit the amount energy providers can charge for gas and electricity. The cap is updated every 6 months, taking into account factors such as the wholesale cost of energy (the amount the gas and electric companies buy it for).
How do Ofgem calculate the energy price cap?
When calculating the price cap, Ofgem consider an array of factors which are subject to continuous change over time. As well as the wholesale cost of energy, which is the largest increase we're seeing now, they also consider factors such as operating, policy and network costs.
Why is it going up?
Essentially, wholesale prices for energy are at an all-time high, almost quadrupling in the past year alone. This is due to a crisis in the global supply chain, energy companies are in a situation where if they couldn't increase the charge to consumers, they would be making a significant loss, with 29 energy companies entering administration in the past year alone.
How much is it increasing by?
The energy price cap is increasing by 54%. For the average household, this means an increase of almost £700 a year. Remember though that it is the cap itself that is increasing, not actual bills (i.e. if you already use less energy than the average household, your bills will increase by less than the average household).
When will prices go up?
The energy price cap increases on 1st April (sadly not an April Fools' Day joke), so we will start to see the price increases reflected in the bills we're receiving from then.
How long will the price rise last?
The price cap is reviewed every 6 months, so prices are likely to change again in the Autumn. However we do not know whether this will be for the better or worse, dependent on the global economy including factors such as Covid, the EU-UK supply chain, and now the supply of oil and gas from Eastern Europe during the war in Ukraine. Only time will tell what the situation will be in 6 months.
What are 'tariffs'?
Tariffs are how we refer to the different types of contracts energy providers offer. There are a wide range of tariffs available, but the ones you're most likely to hear about at the minute are:
Default tariff: This is the tariff that most energy suppliers will automatically put you on to begin with, hence the name. This will usually be the supplier's 'standard variable tariff', and it is likely that you will move onto this once any fixed tariff term (see below) comes to an end.
Variable tariff: Variable tariffs change in line with market forces and the fluctuating wholesale cost of energy. This kind of tariff can be advantageous when prices drop, but of course the risk is when prices increase at all, never mind the spike we're currently seeing in energy prices. The energy price cap is designed to keep these rising prices in check, but when the cap rises, so does the variable rate you pay.
Fixed tariff: Fixed tariffs are signed up to for a set period in which the price you pay for energy remains the same, just as you would sign up to any subscription service at a certain price. These fixed tariffs usually last between 12 and 24 months. If you're currently on one of these tariffs, your energy costs shouldn't increase just yet. It's important however to prepare for your bills to rise sharply when your fixed term ends.
Other tariffs: As well as these, you may also come across other terms such as Unlimited, Dual Fuel, Pre-Payment, and Green tariffs. Compare the Market have a great, easy to read guide to different energy tariffs.
How the price cap increase affects students
- Students in halls/bills included: If your accommodation is part of a 'bills included' package, your landlord may be able to increase the prices they charge you as a result of the energy price increases, depending on the terms within your contract and whether there is a variation and/or fair usage clause. Any energy used above a fair usage clause (which may be likely) could either manifest itself in additional charges or deductions from deposit. Despite of this, you won't usually be in control of who supplies your energy, and equally won't be able to take advantage of any cost-cutting measures others are able to such as reducing heating usage. Similarly, it's unlikely you'll be able to take advantage of more of the Government support available (see below). Either way, you're best advised to submit a meter reading to your supplier before the end of March, when the price cap increases. You can find out more about how and when landlords can increase your rent, or contact the SU Advice Centre for more guidance.
- Home owners & private renters are likely to be affected in more ways initially than others, with energy bills rising excessively for their household. However these households are much more likely to see the benefit of the £150 Council Tax rebate and £200 energy bill discount (rebate if living with someone who pays council tax). See below for more information on the support the Government has announced, and how it help may/may not benefit you.
- All students will face the burden of the cost of living crisis in one way or another, even if this is simply by the cost of living itself. We're all too familiar with rising prices on everything from stationary to meal deals. Additionally, this is likely to have a knock-on effect for any graduates looking to either move out of home or buy their first house, and many may reconsider their options and either change their preferences, delay finding their own home, or even avoid moving out of their family home altogether.
What is the government doing to help?
- Council tax rebate: The Government have announced a £150 rebate to Council Tax payers for anyone in brackets A-D. However, as the majority of students do not pay Council Tax, this isn't necessarily helpful. For those leaving home to go to University at 18, the rebate will go to their family/'home' household, rather than their student accommodation. Where it will be beneficial is for students who do pay Council Tax, for example those who live with a partner and only receive their household 25% discount.
- Energy bills 'discount': All domestic electricity customers will get a £200 discount on their energy bills, which suppliers will automatically apply to bills from October. However, customers will pay this 'discount' back in equal £40 chunks each year from 2023 to 2028, so this is more of a loan than a discount. Additionally, as this is paid directly to the energy customer, there is no guarantee that people living in halls of residence or on a 'bills included' tenancy will see the benefit of this discount. Perhaps the biggest flaw in this is that despite not receiving the initial £200 rebate, people living in halls, student accommodation or with parents will still have to repay the yearly £40 if they leave home between now and the first payment in 2023.
- Find out more about Government Support and whether it applies to you.
What can I do?
Sadly, despite all the negative press it seems there's not a great deal that consumers can currently do to combat the spike in the energy price cap and its effects. The energy price cap is set to rise on April 1st regardless of consumer experts advocating against it, warning of many households being plunged into energy poverty. However, if you are concerned about your situation and finances in light of the increases, there are some options available that are worth considering:
- The SHU Student Funding team are introducing the Energy Costs Bursary, which grants successful applicants a one-off payment of £60 to help cover rising energy costs. Applications open on Monday 4th April and close either when funds have been spent (although we don't know at this stage how much money is set aside for the ECB), or on 29th April, whichever is earlier. Click here to apply or find out more about eligibility and further guidance.
- The SHU Student Funding team have a variety of different support options available to you, which all students are encouraged to take advantage of, including emergency vouchers and the Hallam Hardship fund for those struggling financially. Within their remit is the Money Skills team, who may be able to help you with budgeting and managing your money. Contact Hallam Help in person or online to book an appointment.
- Shop around - most suppliers will be charging similar amounts under the new price cap, but it may be useful to switch to a fixed tariff before the increase. Whether this will be effective or not isn't certain, but it could be worth a try depending on your situation.
- Send a meter reading to your energy supplier before 1st April when the energy price cap is due to increase. This means that you will maximise the amount of energy you've used whilt the price cap is at the lower level, and avoid being incorrectly charged for any energy used before then at the higher price.
- Top up your pre-payment meter before April 1st. Whilst it has not been confirmed by all suppliers, it is being reported that the majority will honour any top-ups made before the increase at the current price cap. This only applies to older style 'key and card' style meters, but if you can afford to top up more beforehand, this may save money in the long-run.
- UPDATE: If you're with Octopus Energy, they've confirmed that any top-ups made to an electric pre-payment meter before 21st April will be honoured at the lower price.
- If you're struggling to pay your energy bills, it's important to keep an open conversation with your supplier. Suppliers have a variety of payment options available to anyone whose financial situation means they may be unable to pay their bill. Your supplier will be able to work with you to put in place a payment plan that's appropriate for you.
- In some circumstances, it may be the case that you're entitled to state benefits you're not receiving. There are lots of online benefit checkers recommended by the Government including Entitledto, Turn2us and Policy in Practice. Our Student Advice Centre has further information on claiming benefits, and run a benefit checking service, to ensure you're getting what you're entitled to. Get in touch with our Student Advice Centre to book an appointment.
- By now, we've all seen lots of tips, tricks and life hack videos for reducing our energy bills, some more helpful than others. From more standard things like turning lights off and washing clothes at lower temperatures, to more obscure measures such as putting tin foil behind your radiator, a quick Google gives you enough ideas to keep you busy until Graduation! However, whilst some may prove useful, they may be of no benefit for students living in accommodation with bills included, where the rewards won't be reaped.
- Ofgem has a list of advice you can follow if you are finding yourself in financial difficulty and struggling to pay your energy bills, including:
- Agreeing payment plans with your supplier
- Signposting to schemes, grants and benefits from suppliers and the Government
- Signposting to debt advice services such as Money Helper (previously Money Advice Service) and National Debtline
- Other tips and further help
Your tips for saving energy
Over the following weeks, we'll be inviting you to submit your best tips, tricks and hacks for saving energy. We'll be publishing our favourites here and on our social media channels. Keep an eye out on our socials to get involved, or send yours now to firstname.lastname@example.org.
- As discussed, SHU Student funding team have a variety of resources and support options available to you. These include SHU Money skills, Hallam Hardship and Emergency vouchers, and Additional SHU funding options, as highlighted in our recent article.
- If you're concerned about your wellbeing as a result of the cost of living crisis, SHU Wellbeing are on hand to help you access support. Whether you're in need of urgent help or having concerns about your longer-term wellbeing, you can either access self-help resources or register for further support. If you need further information on SHU's Wellbeing services, you can visit Hallam Help either in person or online.
- Hallam Support Triangle: If you're concerned about your wellbeing or mental health and it's starting to affect your studies, you can visit your Student Support Officer who can help you access specialist services when you need them you to extra support.
- The SU Student Advice Centre have lots of money self-help resources which may be useful, as well as self-help wellbeing resources on their website. You can also book an appointment with the Student Advice Centre by getting in touch, and they will be able to direct you to services relevant to your situation.
- Blackbullion is an online service that offers a great range of resources to help improve your financial health. They're tailored specifically to students and provide short, interactive pieces of information that are easy to digest.
If you need any further information or supporting information on any of the issues discussed in this article, please contact email@example.com.
Sources and further reading