On 1st October 2023, the energy price cap reduced to £1,923 for a typical annual household bill, bringing the average dual fuel household bill below £2,000 for the first time since April 2022. The decrease in the energy price cap is a reflection of the drop in wholesale energy prices which can now be passed onto consumers more quickly due to the quarterly price cap reviews by Ofgem. Despite this reduction energy bills remain high and data from the charity Citizens Advice has found large numbers are struggling with energy debt, with 7.8 million people in the UK having to borrow money to pay their energy bills in the first half of 2023.
In this article, we explain how your energy bill is calculated, how to save money on your energy bills and the steps you can take if you are finding it hard to afford your energy bills.
How is your energy bill calculated?
How much you will pay for your energy is based on how much energy you use over a period of time. Your energy supplier will charge you a set amount per unit of gas and electricity and this is then multiplied by how many units of energy you use during the billing period. In addition, you will pay a daily standing charge for your electricity and gas and this can vary by region. Ofgem - the energy regulator - sets an energy price cap which limits the maximum amount each supplier can charge per unit of energy in order to keep prices fair for consumers. On 25th August 2023, the energy regulator announced that the energy price cap will be £1,923 from 1st October 2023. Despite this, how much energy you use affects the cost of your energy bill and therefore the less energy you use the less you will pay.
How much does energy cost?
With the introduction of the new Energy Price Cap on 1st October 2023, the average cost of each unit of energy has now reduced to 7p per kWh for gas and 27p per kWh for electricity with the average daily standing charges increasing to 30p for gas and remaining at 53p for electricity.
If you are wondering about how much energy you are using on average at home, we have put together a handy guide that identifies how much appliances cost to use. You can also find out the cheapest ways to cook at home.
How to save money on your gas and electricity bills
As your energy bill is calculated on how many units of energy you use, one of the easiest ways to cut your energy bill is by reducing your energy usage. We have shared a number of money-saving tips below that can help you to cut back on how much energy you are using but depending on your energy supplier, you could also benefit from a cash incentive for reducing your energy usage during peak times. This is because some energy suppliers have opted into a scheme called the Demand Flexibility Service which rewards consumers for controlling peak energy usage. Find out more in our article 'Demand Flexibility Service - How to get paid to use less electricity'.
1. Keep your home warm
Ensuring your home is warm and well-insulated can help reduce your energy usage as your home stays warmer for longer, meaning you are less reliant on gas and electricity. We share ways to better improve your home's energy efficiency:
- Draught-proofing - Reducing draughts around the home could help you to save money. You can buy DIY strips that help to draught-proof windows and doors or alternatively, you could pay for a professional to draught-proof your home. According to the Energy Saving Trust draught-proofing your home could save you up to £105 a year.
- Improve insulation - Improving the insulation inside your home can also help save money. If you have a hot water tank you can buy a sleeve to insulate it and reduce the loss of heat. You can also insulate any exposed pipes. Another way to improve heat insulation is by adding radiator reflector panels (you can also use tin foil and cardboard) behind radiators on external walls. This helps to reduce the amount of heat lost through the wall and reflects the heat back into the room.
- Insulate loft - As heat rises a lot of heat can be lost via the loft of your home if it is not sufficiently insulated. It can be relatively easy to insulate your loft yourself as long as you do not have damp problems or a flat roof, in which case you may need to use a professional. The Energy Saving Trust has a useful guide on roof and loft insulation.
- Replace old windows and doors - A lot of heat can be lost via old windows or windows that are not energy efficient. You can improve the energy efficiency of your windows by upgrading to double or triple glazing but this does, of course, come at a cost. If this is something you cannot currently afford, you may wish to look at draught-proofing your windows and doors instead.
- Rugs and curtains - Having thick rugs and curtains can help to keep the heat inside a room and reduce the heat lost through windows and doors. It can be a cheaper way of insulating your home.
2. Switch to LED bulbs and turn off lights
A quick and easy way to save money in your home is by upgrading your lightbulbs so that they are more energy efficient e.g. LEDs. Don't assume that all LED lightbulbs have the best energy efficiency rating, however, so ensure you shop around carefully when choosing to replace your bulbs.
Another way to save money is to turn off lights and electronics in rooms that you are not using. This can also work with radiators as you can save money by only heating the rooms you use.
3. Turn down your thermostat 1°C
Turning down your thermostat by just 1°C could reduce your heating bill by 10%, a saving of up to £145 per year for an average 3 bed house, according to British Gas.
4. Use energy-efficient appliances and eco settings
- Maintain appliances - Regular maintenance and servicing of appliances can ensure they last longer. Regularly servicing your boiler can ensure that it maintains its energy efficiency and guarantee it is heating your home correctly.
- Use energy-efficient appliances - Maintaining appliances can ensure their efficiency and that they last longer but when it does come to replacing old appliances it is worth looking at models that are more energy-efficient. When looking around for the best deal, energy-efficient appliances tend to be slightly more expensive than less efficient appliances but they can save you more money in the long run as they are cheaper to run.
- Use eco settings - When using appliances you should try to use the eco settings that use lower temperatures. Eco settings do tend to be longer than faster settings but this is because most of the energy used by your appliance is to heat the water. Washing at lower temperatures saves energy but can take longer for your clothes or dishes to be thoroughly cleaned.
5. Control appliance usage
Being more mindful of how you use your appliances around the home can help you to save money on your energy bills.
- Use appliances to full capacity - using your washing machine and dishwasher when full can save you money as you may need to put on fewer cycles. You could also try to reduce the number of times you put on the appliance, e.g. if it is not full can you wait to put the machine or dishwasher on the next day instead?
- Avoid or reduce using high energy appliances - the tumble dryer is well-known for being a high energy usage appliance and you could therefore try to reduce when you use it. You can get airers for all areas around the home including over the bath and on radiators; you can also consider an electric airer. The oven can also be considered a high energy usage appliance, particularly when compared to other kitchen appliances such as the air fryer. Where possible you could reduce the usage to try and save money. Our article, 'How much electricity am I using?' details the average cost to use appliances around the home. We also share additional ways to save money in the kitchen in our article, 'What are the cheapest ways to cook?'
- Only boil the water you need - another way to save money at home is only boiling the water you need. This not only saves energy but water too.
What to do if you’re struggling to afford your energy bill
If you're struggling to afford your energy bill the first thing you should do is contact your energy supplier. Not paying your energy bill can be problematic as it can cause further money issues and your energy supplier has to help you find a solution to help you pay your bills. In early 2022, the Cost of Living support package was introduced by the government. We summarise the help available in our Cost of Living guide but if you are struggling to pay your energy bills there is additional help and support available, which we list below.
Help if you cannot pay your energy bill
- Contact your energy supplier - One of the first things you should do is notify your energy supplier as they are obliged to help you come to a solution. They should be able to discuss an affordable way for you to repay them.
- Check your eligibility for grants and schemes - You may be eligible for some grants and schemes that can help cover the cost of rising energy bills and some energy suppliers also offer assistance if you are not a customer. Find out more in our article, 'Grants and schemes for help with your energy bills'.
- Pay your bills via your benefits - If you receive certain benefits, such as Universal Credit and Income Support, it may be possible to pay your energy bill debts via your benefits with the Fuel Direct Scheme.
- Get free debt help and advice - There are a number of charities that offer free debt help and advice. Find out where to get free debt advice.
Check out our full article 'What to do if you're struggling to pay your energy bills' for more information.