Why are energy bills going up and how can you save money?

The snow is falling – our bills are not.

Mid-winter energy costs are rising from January for 34 million customers on tariffs regulated by the official price cap. But why is this happening despite wholesale prices actually falling?

Friday’s energy price cap announcement brings average annual bills to £1,758 in January, a small rise of just 28p a month, but wholesale prices have dropped 4%. So why are we paying more for energy?

From January, an average bill contains £12 a year to pay for building the Sizewell C nuclear power plant.

Plus more for standing charges – typically £7.30 a year extra – and £6.82 more for the government’s Warm Home Discount.

The warm home discount offers £150 discounts and now covers an extra 2.7 million households, but it is other customers who pay for that through their bills.

Along with that, £38bn will be invested in the new Sizewell C nuclear power plant, and some of the construction costs are being added to our electricity bills, though there will be no energy produced from the power station for a decade.

What makes things even worse is that experts are already predicting another rise in April of potentially £57 a year on average.

How to save on energy

The big message is that power customers are not powerless; it’s a good time to consider a switch, especially because the price cap is expected to rise not just in January but also in April.

Some fixed tariffs are 10% below the price cap, and some customers could save almost £200 a year. One leading comparison site (USwitch) tells me 26 fixes currently beat the price cap.

It’s not always about switching your tariff; many people can save just by changing their payment method. You can cut bills by £47 on average by direct debit pre-payment.

Then there are all the tips about reducing energy use, easier said than done in these temperatures.

Lowering the flow temperature of your boiler can be a quick way to save £65.

Many people have the flow set at 70C, just turning it down to between 55- 60C can use 6% less energy, and you usually don’t notice the difference.

So, a call to action, it’s a good time to look at how you pay – as well as who you pay – and what you pay.