When will energy bills go down?

Households across the UK are facing an increase in their energy costs this winter as energy regulator Ofgem raised its price cap.

Effective from 1 October, the cap rose by £149 from the previous £1,568 a year for a typical household in England, Scotland and Wales to £1,717.

This will see the average bill rise by around £12 a month, or £149 a year, from the current £1,568 for a typical dual-fuel household in England, Scotland and Wales.

Ofgem's new cap will be just 6% or £117 lower than it was compared to the same period last year, although bills still remain hundreds of pounds above pre-energy crisis levels.

And while inflation held steady at 2.2% in the year to August – well below the peak of the cost of living crisis – that doesn't mean prices are falling, with many people still feeling the impact on their budgets.

In fact, according to a survey by YouGov for poverty campaign group National Energy Action released on 30 September, almost half of British adults are planning to ration their energy use this winter.

Here, Yahoo News UK explores how long this could last.

When will your bills get lower?

There is no definitive answer to this question, as we don't know exactly how energy bills, the price of other essential goods and wages are going to change in the coming months and years.

While energy consultancy firm Cornwall Insight expects the typical household’s energy bill to fall by 1% in January – providing a small glimmer of hope – earlier government estimates suggested the price cap would increase by a further 3%.

Even if Cornwall Insight's prediction is correct, charity National Energy Action says "it will remain really tough for low-income and vulnerable households during what is usually the coldest part of the year".

Wholesale rates of energy, which suppliers buy at, have dropped over the past month, personal finance Martin Lewis said, but due to the UK's "perverse" energy market, he said the price cap mechanism is "time-lagged" as caps are set for three months at a time.

"You'll need to wait until January for the recent falls to be factored in, which is why the cap is predicted to drop," he wrote on X.

Until then, the End Fuel Poverty Coalition says tomorrow's new cap will leave the average household paying around 65% more for their energy than in winter 2020/21. It says this follows "years of the wider cost of living crisis, meaning households have less ability to pay these high prices".

"We’re now heading into the fourth winter of sky-high energy prices, meaning the average household will have paid more than £2,500 extra for their energy than had we not been so exposed to volatile energy markets," the campaign group adds.

National Energy Action warns wholesale energy prices are predicted to remain high "through to the end of the decade" and calls for long-term solutions, including a government consultation on a social tariff to protect low-income households permanently.

It is also calling for significant investment in energy efficiency to make the UK’s homes much cheaper to heat.

What about inflation?

Inflation has been a key feature of the cost of living crisis, and the good news is that since its peak of 11.1% in October 2022, it now stands at 2.2%.

The rate had been falling throughout the year, reaching the Bank of England's target of 2% for the first time in three years in May and June, before increasing slightly to 2.2% in July and August.

In September, the Bank of England said: "We can’t predict exactly what will happen to inflation, but we think it is likely to edge up to about 2.5% towards the end of the year before falling again.

"While prices overall are very likely to go up more slowly than they have done in recent years, lower inflation doesn’t mean prices will fall. Most things will still cost more than they did before."

With inflationary pressures easing, the Bank of England cut the interest rate from a 16-year high of 5.25% to 5% in August – a sign of improvement, albeit a modest one.

"If those pressures continue to ease, we should be able to further reduce interest rates gradually. But it’s vital that we make sure inflation stays low, so we need to be careful not to cut rates too quickly or by too much," the Bank added.

While these are all promising signs compared to last year, an analysis by the Joseph Rowntree Foundation in June suggests that Britons are still struggling. It found seven million low-income families (60%) reported going without essentials like food, showers, heating and toiletries in the six months to May 2024.

"For the lowest-income families and those on Universal Credit we have seen no change in the proportion going without essentials, with seven in 10 families in the bottom income quintile, and the 86% of low-income families on Universal Credit, going without the essentials in May 2024," the charity said.

It said that while earnings growth is improving, relative to inflation, average post-tax earnings are still not estimated to surpass inflation during the forecast period to 2029.

Pensioners 'frightened how they’ll manage this winter'

While there are some signs of economic pressures easing, charities and campaigners are warning of a tough winter ahead for millions of households.

It comes after the government decided to scrap non-means tested winter fuel payments, with around nine million people set to lose the allowance of up to £300 this year.

In September, Parliamentary Secretary to the Treasury Emma Reynolds said that of the 1.4 million pensioners living in absolute poverty (after housing costs), only 200,000 were in receipt of pension credit.

This means 1.2 million pensioners already living in poverty could face losing the payment, although the government has been running a campaign to get more of those eligible for pension credit to apply.

Age UK charity director Caroline Abrahams added: "We’re hearing from older people worried about how they will cope without their winter fuel payment, including many on low and modest incomes who are planning to ration their heating this winter because they’re frightened how they’ll manage this winter.

"For an older person to be forced to live in a cold home is deeply worrying because it’s very bad for their health, especially if they are living with lung or heart conditions or are very frail."

Andy Manning, Head of Energy Policy at Citizens Advice said: “We know people are so worried about price increases that one in four say they could be forced to turn off their heating and hot water this winter.

"We’re particularly concerned about households with children and those on lower incomes, who are most likely to struggle with their heating costs. This price rise means bills are now around two-thirds higher than before the energy crisis. With record levels of energy debt and the removal of previous support, people are desperate for help."

'Millions facing fuel poverty'

With energy bills set to rise by 10% from next month, 6 million UK households will be in fuel poverty, according to National Energy Action.

Its definition for this is when a household needs to spend 10% or more of its income on energy in order to maintain a "satisfactory heating regime".

A new survey by National Energy Action and YouGov finds almost half of adults in Britain (46%) say they are likely to ration their energy use this winter.

With households facing higher energy bills as they enter the winter, the charity warns this is likely to mean more debt.

Last week, Ofgem announced that energy debt had risen by £400m in the last quarter – reaching a new record high of £3.69 billion.

Read more

• Which? reveals top 5 tips to tackle Ofgem price cap rise as energy bills soar (The Independent)

• Energy bills to go up from tomorrow – but experts say costs can be cut if you act fast (Independent)

• Seven money changes in October affecting energy bills and stamps (Evening Standard)