People at the Emmaus Community Cafe in Ipswich have been reacting to the "shocking" energy price cap figures announced this morning.

Gillian, who is a pensioner, says: "It's an absolute disgrace, it's a nightmare."

"I've got to struggle and then to put it up again in January, they're really twisting the knife," she tells BBC Breakfast.

"I'm going to have to turn my heating down and wear a coat indoors."

Sophie, 20, says: "It's absolutely disgusting. I live on my own and I don't know what to do any more, I don't know if I can afford it.

"I've had to cancel quite a few things at the moment, and I'm going to try and find support to sort it," she tells the BBC.

Sean earns £9.50 per hour on the national living wage. He says the figures announced today are "almost unimaginable, considering the bills we're going to face come January as well".

"I don't get enough money to pay these things and I'm going to have to make some sacrifices. Even things like having glasses, it's very important for me to see, but right now I'm really struggling to afford things like that."

Our TV and radio colleagues are broadcasting live from Ipswich today as part of our Counting the Cost of Living series.

BBC News will be asking people from towns and cities around the UK how they are coping - and revisiting them over the coming months.

We’ll be going to 12 different locations to speak to households, businesses and families to find out how the rise in living costs is affecting you.

We started in the Midlands in August with Derby, and today we are in Ipswich, but will also be speaking to people in Gloucester, Croydon, Ilfracombe, Bolton, Hawes in Yorkshire, Sunderland, Lurgan in Northern Ireland, Newtown in Wales and Arbroath and Dumbarton in Scotland.

If you’d like to share your story, please get in touch with us at haveyoursay@bbc.co.uk.

Why is there such focus on high energy bills?

Simply put, energy prices are driving up inflation, otherwise known as the rising cost of living. Inflation measures the rate at which consumer prices are growing and as of July, the rate hit 10.1% which is the highest in 40 years.

And it is expected to soar even further.

The Bank of England has forecast it will rise to more than 13% in October, when the latest energy price cap takes effect.

But more recently, investment bank Citigroup predicted it could reach more than 18%, which would be the highest rate since 1976.

What does this mean?

The Bank of England could raise the interest rate even further after it forecast inflation would rise to more than 13% in October, the steepest increase in 27 years.

The Bank has a target to keep inflation at 2%.

It may be good news for savers who have endured very low interest rates for years, but is not so great for some types of mortgages.

Read more about inflation here.

With energy prices helping drive up the cost of living in the UK, the BBC has been looking into tips for managing on a stretched budget.

Consumer expert Martin Lewis has covered issues like holiday spending and mortgages and rising interest rates in his regular programme on BBC Radio 5 Live.

Petrol prices have been adding to the pain of rising energy bills. Making fewer journeys is the most obvious way to save money on petrol, but how else can you use less fuel?

Here are five popular tips from drivers - and a look at whether they really work.

Meanwhile, BBC Food has pulled together this list of £1-a-portion dinners to help feed families and friends for less.

The Energy Saving Trust says making several small changes to energy habits, external could help reduce bills, such as limiting your shower time and air drying your clothes.

Labour's shadow chancellor Rachel Reeves MP accuses the two Conservative leadership candidates of having "almost nothing to say" about the huge energy price rises.

She says Rishi Sunak and Liz Truss have been setting out their policies on nearly everything "apart from the biggest issue facing our country right now".

Watch her outline Labour's plan below:

Typical annual energy bill could hit £6,600 a year in Aprilpublished at 08:27 British Summer Time 26 August 2022

08:27 BST 26 August 2022

Kevin Peachey
Personal finance correspondent

Although today’s news is a major concern for billpayers, it isn’t particularly unexpected.

What will be a huge shock is the forecasts from energy consultancy firm Cornwall Insight about bills next year.

Today's announcement covers October to December, but the firm suggests a typical annual bill could hit nearly £5,400 in January, and £6,600 in April. That would be a £550-a-month bill.

Many people’s biggest bill is their mortgage, which typically is £700 a month.

But some caution should be placed on these numbers. While Cornwall Insight’s predictions have been accurate, there is still a considerable amount of time to go before these bills are set.

As we know, wholesale energy price and global events can change quickly.

Image source, PA Media

When energy companies calculate your bill, they measure your usage by kilowatt hours (kWh).

Ofgem's announcement today means the price of electricity will rise on average from 28p per kWh to 52p in the October to December period.

Gas is expected to go up by 7p to 15p per kWh.

The price cap also limits the daily standing charge - that's the fixed amount you have to pay, no matter how much (or little) energy you use.

This will go up from 45p and 27p for electricity and gas respectively to 46p and 28p.

Get more info here., external

Monthly energy bills forecast to climb close to average mortgage costpublished at 08:16 British Summer Time 26 August 2022

08:16 BST 26 August 2022

Faisal Islam
BBC Economics Editor

Average energy bills of £300 per month will be unthinkable and unmanageable for several million households.

Today’s announcement puts them at this level for the rest of the year.

But the closely watched Cornwall Insight predictions have that number closer to £550 per month by April, nearer to the average cost of a mortgage, as market prices have surged yet higher in recent days.

To give a sense of scale, these predictions mean average households will be paying more for energy than for their whole income tax bill. Or it is the equivalent of facing a basic rate of tax above 40% rather than 20%.

Ultimately, it is the judgement of the industry that this is not actually possible.

But tens of billions more public support of some type seems inevitable.

A judgement would have to be made on how targeted the support would be, and whether the expected further record profits of energy producers could be tapped.

Here is a summary of what's been happening this morning:

• The typical household energy bill will hit £3,549 a year from October, regulator Ofgem has announced
• This is an 80% rise on the current enegy price cap of £1,971

• It says the market for gas in winter means that prices could get significantly worse through 2023
• Analysts Cornwall Insight have revised their forecast for January's energy price cap to £5,386 a year

• Chancellor Nadhim Zahawi says he knows the new price cap "will cause stress and anxiety for many people"
• He says he is "working flat out to develop options for further support"
• But Labour’s Shadow Chancellor Rachel Reeves says the government needs to freeze gas and electric energy prices through winter
• She accuses the Conservative Party leadership candidates of having "almost nothing to say" on the issue

We have more reaction to this morning's announcement, this time from Money Saving Expert's Martin Lewis.

"We're in an absolutely horrendous situation," he tells BBC Radio 4's Today programme.

"It's a catastrophe... unaffordable, terrible."

This is not a cap on how much you will have to pay, he adds, as the cap is on standing charges and unit rates.

"This is shocking but it is not a surprise... Why have we got to this announcement stage and still no help?

"This is not good government."

He's described the "panic, the dismay, the depression" experienced by people who've been contacting him, worried about their bills

Detail is missing from Rishi Sunak and Liz Truss on what they will do about energy costs if they become prime minister, adds Lewis.

We need a policy that "feeds people and heats people so that we don't have people dying because of these price caps this winter", he says.

We've had a government response to the energy price cap figure which says it is getting ready to give out any extra cost of living support as soon as we get a new prime minister.

A government spokesperson says: “We know people are incredibly worried about rising energy bills, following unprecedented gas prices across the continent driven by global events, including Putin’s aggression in Ukraine and his weaponisation of energy in Europe.

“Direct support will continue to reach people’s pockets in the weeks and months ahead, targeted at those who need it most like low-incomes households, pensioners and those with disabilities."

They outlined previously announced help such as £400 discount on winter energy bills with one in four UK households getting £1,200 in instalments across the year.

They added: “The civil service is also making the appropriate preparations in order to ensure that any additional support or commitments on cost of living can be delivered as quickly as possible when the new prime minister is in place.”

Robert Cuffe
BBC head of statistics

Most energy suppliers are middlemen: they buy energy in the wholesale market and then sell it on to you.

The price cap allows for them to make a profit of just under 2p for every £1 in your bill.

When bills rise, their profits will rise too (the purple at the bottom of the bars) but nothing like as quickly as the profits of the companies they’re buying energy from.

That’s because it’s the wholesale cost of energy - driven by the price of gas - that’s rising so much and pushing the price cap so high.

The chart shows that the main difference in the height of the bars is that blue area on top, showing the wholesale costs.

Take British Gas: they made nearly £100m in profits supplying energy in the first half of the year. Their parent company, which also makes money from oil and gas drilling, saw profits more than 10 times that amount.

The VAT take rises too with overall prices but cancelling it, or green levies, wouldn’t bring bills back to the level they are today.

Analysts Cornwall Insight have revised their forecast for January's energy price cap to an eye-watering £5,386 a year.

It says today's announcement should "act as a wake-up call to policymakers".

Dr Craig Lowrey, senior consultant at Cornwall Insight, says: “The cap was never meant to be a permanent solution, it was created for a different energy market than the one we face today and has not protected consumers from what will be incredible hardship this winter."

He urged ministers to review the price cap and to consider ways to protect the most vulnerable, such as social tariffs.

“In the meantime, a key focus for the next prime minister and for Ofgem must be protecting consumers, and the wider economy from the impact of this rise," he says.

"There are several avenues that can be explored including a review and expansion of the current support package of at least £400 per household."

We’re hearing now from Labour’s Shadow Chancellor Rachel Reeves.

Reeves says the "astronomical" price rise "will strike fear in the heart of many families right across the country, and force many to make unthinkable choices this winter".

She says the government needs to freeze gas and electric energy prices through winter. This could be funded by bringing in a windfall tax on oil and gas companies' profits, she adds.

"That is the right and fair thing to do, that's what Labour would do, that's what the government should press on and do," she adds.

Chancellor Nadhim Zahawi says he is working on a plan tackle the energy crisis to be in place for the next government, which will be decided when either Liz Truss or Rishi Sunak becomes prime minister.

But Reeves hit out at the Conservative Party leadership candidates, saying they've "got almost nothing to say" on the issue.

Kevin Peachey
Personal finance correspondent

The price cap only covers England, Wales and Scotland.

Households in Northern Ireland are not included in the cap, because of the limited number of suppliers.

Prices have been going up a lot in Northern Ireland, and some research suggests its fuel poverty levels will be the highest in the UK.

For everyone else, there is a very thin silver lining to the dark clouds of soaring bills.

Families can at least try to budget for the first half of the winter with some certainty about the level of their energy bill.

It will be expensive, but at least we know how expensive.

The energy price cap applies to you if you are on a default energy tariff, whether you pay by direct debit, standard credit or a prepayment meter.

If your supplier has stopped trading and you are switched to a new supplier, you are probably on a price-capped tariff.

However, the price cap will not apply if you:

• are on a fixed-term energy tariff (a tariff with a fixed end date)
• have chosen a standard variable green energy tariff Ofgem has exempted from the cap
• you live in Northern Ireland

You can find more information on whether the price cap applies to you or not here., external

Ofgem says it is not giving price cap projections for January because the market remains too volatile, but it says the market for gas in winter means that prices could get significantly worse through 2023.

It says the new price cap level will take effect from 1 October 2022, but it is possible some suppliers may begin increasing direct debits before this date to spread costs.

Customers worried about when their direct debit will increase should contact their supplier, Ofgem says.

Chancellor of the Exchequer Nadhim Zahawi has responded to the announcement that the typical household energy bill will hit £3,549 a year from October.

“I know the energy price cap announcement this morning will cause stress and anxiety for many people, but help is coming with £400 off energy bills for all, the second instalment of a £650 payment for vulnerable households, and £300 for all pensioners," he says in a statement.

“While [Russian President] Putin is driving up energy prices in revenge for our support of Ukraine’s brave struggle for freedom, I am working flat out to develop options for further support. This will mean the incoming prime minister can hit the ground running and deliver support to those who need it most, as soon as possible.”

Image source, EPA

The boss of the energy watchdog Ofgem says the price of energy has reached record levels due to Russia's invasion of Ukraine and it "has no choice, but to reflect these cost increases in the price cap".

He says the new prime minister will need to act further to tackle the impact of the price rises.

Ofgem is working with ministers, consumer groups and industry on a set of options for the incoming prime Minister that will require urgent action, he says.

"The response will need to match the scale of the crisis we have before us."