Now we know the size of the problem - what is the solution?published at 07:12 British Summer Time 26 August 2022

07:12 BST 26 August 2022

Simon Jack
BBC Business Editor

The current support on offer - £400 for all bill payers with an additional £650 for people on qualifying benefits - was announced when bills were expected to hit £2,800 this October. We are clearly well beyond that, and with wholesale prices surging back near record levels, there is worse to come.

The current Chancellor Nadim Zahawi has dismissed proposals by the Labour Party to freeze all bills at the current level for six months, and a plan by the energy industry to freeze them for two years as being untargeted as they offer the same relief to better-off households.

He said the government was working on its own proposals for the new prime minister to consider, which would include support for businesses which are not covered by the cap.

Rishi Sunak has said he will cut VAT on domestic energy and provide further targeted support for needy households while Liz Truss has indicated that she will help, but has been less clear about how she would deliver it.

Up to now she has favoured helping households through tax cuts, but critics point out that would do little to help people on the lowest incomes.

One thing is clear: how the next prime minister tackles the biggest cost of living crisis in living memory will be the first and probably defining challenge of their time in No 10.

A typical household on a pre-payment meter will see their bills rise from £2,017 to £3,608 from 1 October, Ofgem says.

The figure of £3,549 for a typical household energy bill represents a rise of 80% on the current cap of £1,971, Ofgem says.

Image source, .

The typical household energy bill will hit £3,549 a year from October, Ofgem announces.

Simon Oscroft, co-founder of So Energy, also tells BBC Radio 4's Today programme that prices may have to rise to £5,000 and higher next year.

"The real cost of energy this winter if we were to buy energy at today's prices is actually a lot more than the price cap and suppliers will be losing money," he adds.

We're expecting to find out how high energy bills will go in October very soon.

The announcement is expected from energy regulator Ofgem at 07:00 BST.

A household in England, Wales and Scotland using a typical amount of gas and electricity currently pays about £2,000 a year.

That annual bill is predicted to soar to more than £3,500, leaving many struggling or unable to pay.

Stay tuned while we bring you the latest updates.

Why are gas and electricity bills so expensive? In a nutshell: Covid and Russia.

When countries started lifting pandemic restrictions, and major economies creaked back to life, demand for key commodities such as oil soared which sent prices higher.

Then, on 24 February, Russia invaded Ukraine.

Russia is a major oil and natural gas producer and exporter. While countries have introduced sanctions against Russia, the Kremlin has also been squeezing supplies of gas to Europe, again pushing up prices.

In fact though, wholesale gas prices were already on the rise last year, so much so that around 30 UK suppliers went bust - not helped by the energy price cap which stopped them from passing on the higher cost of wholesale gas to domestic customers.

Kevin Peachey
Personal finance correspondent

Previous price caps have been in place for six months, but this one - and subsequent caps - will only last for three months. Why?

Because Ofgem has changed things around owing to the current situation.

It says people will see the benefit of falling prices (when they eventually come) reflected quicker in their bill. It will also protect against more suppliers going bust, it says.

It means there will be a seemingly inevitably higher, cap taking effect in January - the coldest time of year, and when people are also trying to pay off the cost of Christmas.

Simon Oscroft, co-founder of So Energy, says he’s “extremely worried for all of our customers and of course households across the UK” ahead of this morning's announcement.

He tells BBC Radio 4’s Today programme forecasts are saying over 50% of the UK will be in fuel poverty this winter and the numbers are “frightening”.

All suppliers are expected to set the level at the price cap, he adds, because wholesale prices are so high, driven higher by the war in Ukraine.

He says the government needs to step in to support people.

Katie Thompson
BBC News

Like many people, Marina Keohane is struggling with her finances.

The 53-year-old recently stopped working due to ill health and has applied for Universal Credit. She’s been attending drop-in sessions at her local Citizens Advice Bureau in Ipswich for advice.

The former care worker says:“I’m living on nothing at the moment. I’m worried about heating costs come the winter. I feel quite lucky at the moment because of the weather but come the winter time - dark nights, cold. I’m only just getting by as it is without having to bung loads of money on my metres.

“The only thing that’s on all the time is the fridge freezer. I have a TV on, I don't have the light on - I sit in darkness. Eating wise, I'm scared to use my cooker. It's electric and obviously if you put something in the oven it uses more [energy] so I try to stick to ready meals in the microwave or do salads.

"Every time I switch a light on, use the microwave or do anything, even using the kettle, all these things are going through my head, checking the metre every time because I’ve got to think to the winter time.

“I’m not looking forward to it at all.”

Read more here.

In what might have felt like a never-ending game of one-upmanship, experts have been vying to predict just how much more we can expect to pay for our gas and electricity from October.

The average household bill is currently £1,971 a year.

Consultancy Cornwall Insight reckons this could jump to nearly £3,600 a year when the new energy price cap is announced at 07:00 BST.

Because the energy price cap is now updated every three months instead of every six months - much to the chagrin of some - Cornwall expects their average bill to increase again in January, to £4,650, or £388 a month.

But Ofgem, which sets the price cap, says predictions should be treated with "extreme caution".

The energy price cap is the maximum price that companies can charge households for each unit of gas and electricity they use.

This unit is known as a kilowatt hour (kWh).

The energy price cap is set by Ofgem, the energy regulator, external and today’s announcement will affect household bills from 1 October.

The big figure that will be announced at 07:00 BST will show how much a household using a typical amount of energy can expect to pay over a year.

The price cap applies to around 24 million homes in England, Scotland and Wales. Energy prices in Northern Ireland are controlled separately.

There are two price caps - one is for the vast majority of people who are on variable, or default, tariffs.

The second is for households using pre-payment meters.

Welcome to the BBC’s live coverage of the energy price cap announcement which will tell you how much you can expect to pay for your gas and electricity from October.

At 07:00 BST, Ofgem, the energy watchdog, will announce the new cap on prices in homes in England, Scotland and Wales.

It is expected to mean a sharp rise in bills for millions of households.

Stay with us for the announcement, the reaction and expert analysis on what this means for you and what help is available.