SAY WATT
Millions face up to £130 extra charge on energy bills for infuriating reason from next week – check if you’re affected
We reveal exactly how much you'll pay
MILLIONS face an extra charge of up to £130 on energy bills from next week.
Households will be paying energy firms £1.3billion in annual charges to help suppliers recover bad debt from April 1, according to a report.
1
Energy firms were already able to charge £842million a year on bills for bad debt allowances.
But last month, Ofgem announced that an additional £735million can be charged - this works out to £28 per household a year.
Although, this is partly offset by a £275million adjustment to the bad debt charges incurred after the Covid pandemic, which worked out at £11 per household a year.
Charity Warm this Winter has today published a report revealing that the combined impact of these bad debt charges will amount to up to £130 a year for millions of households.
READ MORE IN MONEY
Bad debt refers to the amount of money owed by customers that is unlikely to realistically be paid back.
These charges are paid to suppliers to help cover these losses so they can help support struggling customers.
The level of bad debt has soared in recent years due to increases in wholesale energy prices and the wider cost of living crisis putting pressure on household finances.
Fiona Waters, spokesperson for the Warm This Winter campaign said: "Energy bill payers are quite rightly up in arms about these additional costs which look like they do nothing to reduce the debt of ordinary people but instead help energy companies pursue those who simply can’t pay."
Most read in Money
Save money on your energy bills with these cold weather tips
Policy expert and report author Richard Winstone added that Ofgem should make it clearer where the funds from the new charges are going.
"Throwing money at suppliers and hoping they do the right thing is what has led to record profit levels from the likes of British Gas at a time when customer service standards are at their lowest for a decade and customer debt is at its highest.
"Ofgem either needs to stop increasing the cost to consumers or start creating regulation that ensures suppliers use the additional funds for specific, consumer-benefitting, purposes."
How much will customers pay from April 1?
The exact amount you'll be charged depends on how you pay for your energy.
Prepayment meter (PPM) customers will pay the least at £25.17 per household a year.
This is partly made up of a £8.77 PPM-specific debt-related allowance Ofgem added to the price cap in October 2023.
It had been paid by the government under the Energy Price Guarantee Scheme so far, but that ends on March 31 so it will go on to the bills of PPM customers from April 1.
It's also combined with how much every energy customer pays towards debt-related costs anyway - estimated to be £16.40 a year for PPM customers.
Direct debit customers will pay £38.96 a year as a result of the increase in charges.
This includes the new £28 payment announced by Ofgem starting on April 1, and the estimated existing debt-related costs for direct debit customers - which will be £21.96.
This has been partly offset by the termination of the allowance worth £11 a year that covered debt costs related to the Covid pandemic.
Standard credit customers, those who pay as they go along by card or cheque, will be hit hardest paying £129.71.
This is made up of the £28 fee and existing charges of £112.71 - with the £11 taken off.
There are thought to be around 2.5million standard credit customers in the UK.
How do I calculate my energy bill?
BELOW we reveal how you can calculate your own energy bill.
To calculate how much you pay for your energy bill, you must find out your unit rate for gas and electricity and the standing charge for each fuel type.
The unit rate will usually be shown on your bill in p/kWh.The standing charge is a daily charge that is paid 365 days of the year - irrespective of whether or not you use any gas or electricity.
You will then need to note down your own annual energy usage from a previous bill.
Once you have these details, you can work out your gas and electricity costs separately.
Multiply your usage in kWh by the unit rate cost in p/kWh for the corresponding fuel type - this will give you your usage costs.
You'll then need to multiply each standing charge by 365 and add this figure to the totals for your usage - this will then give you your annual costs.
Divide this figure by 12, and you'll be able to determine how much you should expect to pay each month from April 1.
What will the energy price cap be from April 1?
Ofgem confirmed the new price cap last month, which comes into effect on April 1.
The cap will fall from the current rate of £1,928 to £1,690, the fresh figures show.
It means the average household could see their annual bill drop by £238.
But bear in mind that the price cap is reviewed every three months, so your annual bill could still change.
The energy regulator said it will cut the price that a supplier can charge for gas from 7.42p per kWh today to 6.04p from April 1.
The price of electricity will fall from 28.62p per kWh to 24.50p, Ofgem said.
The standing charge, a fixed daily amount you have to pay for energy, no matter how much energy you use, is going up though.
For gas, standing charges are going up to 31.43p a day, from 29.6p currently - based on the average across England, Scotland and Wales.
The daily standing charge for electricity will rise to 60.1p a day, up from 53.35p.
This means that for direct debit customers, your total energy bill standing charges will rise to £334 a year from £303 now.
It's important to note though that the price cap is not a cap on the overall amount people will pay for their energy.
Instead, it caps the amount that they pay per kilowatt hour, or unit, of gas and electricity.
The figure is calculated based on what Ofgem thinks an average household will use.
This is calculated assuming that a typical household uses 2,900 kWh of electricity and 12,000 kWh of gas across a 12-month period.
Those who use less will pay less, and those who use more will pay more.
Be aware that the exact unit rates and standing charges you pay will vary slightly based on your supplier, where you live and how you pay for your gas and electricity costs.
How to save on your energy bills
SWITCHING energy providers can sound like a hassle - but fortunately it's pretty straight forward to change supplier - and save lots of cash.
Shop around - If you're on an SVT deal you are likely throwing away up to £250 a year. Use a comparion site such as MoneySuperMarket.com, uSwitch or EnergyHelpline.com to see what deals are available to you.
The cheapest deals are usually found online and are fixed deals - meaning you'll pay a fixed amount usually for 12 months.
Switch - When you've found one, all you have to do is contact the new supplier.
It helps to have the following information - which you can find on your bill - to hand to give the new supplier.
- Your postcode
- Name of your existing supplier
- Name of your existing deal and how much you pay
- An up-to-date meter reading
It will then notify your current supplier and begin the switch.
It should take no longer than three weeks to complete the switch and your supply won't be interrupted in that time.
What should you do now?
In the past, switching suppliers was the best way to save money on energy bills but since the energy crisis began there hasn't been much point due to a lack in competition.
This is due to many firms pulling their best offers, partly due to the Market Stabilisation Charge - which is now being axed in April.
Some fixed deals are currently available for close to the April price cap but groups like Which? have warned most of these deals will save consumers very little.
If you are looking to move now though, make sure to do your research.
Some deals have exit fees included that would eat into the savings you'd make by switching.
These exit fees are found on fixed energy deals, not on standard variable rates.
READ MORE SUN STORIES
You can compare the best deals using price comparison sites like MoneySupermarket and Uswitch.
It might also be worth checking with your current supplier if there's a cheaper deal they can offer you instead.
Do you have a money problem that needs sorting? Get in touch by emailing squeezeteam@thesun.co.uk.
Plus, you can join our Sun Money Chats and Tips Facebook group to share your tips and stories.