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Energy bills UK: how much bills will rise in April 2022 - UK increase and gas prices explained

A dramatic increase in the cost of wholesale gas has put pressure on the energy industry and seen household bills soar as a result

Households are facing soaring costs as the energy price cap rise takes effect with a fuel poverty charity warning the average cost of heating a home has doubled in the past 18 months.

The energy price cap increased on Friday (1 April) and will be reviewed again in six months with many experts expecting it to increase once more.

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Trade body Energy UK previously warned gas and electricity bills could rise by up to 50% by spring time and those fears have been realised after Ofgem announced a 54% hike to energy price cap which took effect on 1 April 2022.

Here's why energy bills are skyrocketing and why they are forecast to increase even more later this year.

Why are energy bills going up?

A dramatic increase in the cost of wholesale gas has put pressure on the energy industry and exposed the cracks.

Wholesale gas prices have increased by 250% since January 2021 and rose by 70% in August alone, as the energy crisis gripped firms.

Factors for the prices going up include supply and demand following a particularly cold winter across Europe in 2020.

This winter chill put pressure on global supplies and gas levels in storage are much lower than normal as a result.

Goldman Sachs has already warned that prices in the gas market are likely to remain at twice their usual levels until 2025.

Fuel prices have also reached record highs in recent weeks amid a rise in oil prices following Russia’s invasion of Ukraine.

Mr Sunak cut fuel duty by 5p in his spring statement last week, but retailers have been accused of failing to fully pass on the saving

What has been the impact of increasing energy bills?

More than 20 energy firms have gone bust already as smaller companies have struggled to cope with the sustained rise in wholesale gas costs.

Companies shouldered the initial financial weight before an increase to the energy price cap alleviated some of that burden in October 2021.

However, it came too late for some smaller firms, such as Pure Planet and Avro Energy, who could not recoup costs fast enough to plug the holes.

Ministers and Ofgem worked together with struggling suppliers, with many entering the independent regulator's Supplier of Last Resort process.

And, while no-one has been without energy under the process, consumers are being switched over to significantly increased rates or tariffs.

The energy price cap for those on default tariffs who pay by direct debit increased by £693 from £1,277 to £1,971 from 1 April.

Prepayment customers will see a bigger jump, with their price cap going up by £708, from £1,309 to £2,017.

Will energy bills rise?

Citizens Advice said rising costs meant around five million people would be unable to pay their energy bills from April, even accounting for the support the Government has already announced.

Fuel poverty charity National Energy Action (NEA) warned the cost of heating an average home has now doubled in 18 months, leaving 6.5 million households unable to live in a warm, safe home across the UK.

With an increase to the cost of living, generally, households had already been hit by rising energy bills, particularly in the second half of 2021.

And, with increased demand over the winter months, many industry leaders had anticipated 50% higher bills for consumers in the spring 2022.

An Ofgem spokeswoman said: “We know this rise will be extremely worrying for many people.

“The energy market has faced a huge challenge due to the unprecedented increase in global gas prices, a once in a 30-year event, and Ofgem’s role as energy regulator is to ensure that, under the price cap, energy companies can only charge a fair price based on the true cost of supplying electricity and gas.

“Ofgem is working to stabilise the market and over the longer term to diversify our sources of energy, which will help protect customers from similar price shocks in the future.”

Chancellor Rishi Sunak has previously pledged to “take the sting out” of the price rises, promising all 28 million households in Britain would get a £200 upfront rebate on their energy bills from October.

The Government will provide the cash for this, but it wants the money back so will hike bills by £40 per year over the next five years from 2023 to recoup it.

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