OFGEM has announced that the Energy Price Cap will increase from 1 January 2024.
This will affect most consumers who are not on fixed rates tariffs at this time.
The price of energy for a typical household who use gas and electricity and pay by Direct Debit will go up by £94. This will take the price cap from £1,834 to £1,928 per year.
This increase will affect both tenants who pay their own bills or have an energy supply contract and Landlords who include bills in the monthly rent.
Will this affect Rooms To Rent?
Most house shares, HMO’s and other shared property with rooms to rent will generally include gas and electricity bills within the monthly rent amount. Obviously, this change will increase costs for landlords which may in turn have an impact on rising rents to cover these additional costs.
Tenants who are already struggling to meet their monthly rent and other essential commitments will also find it more difficult with these increases.
How Much Will You Actually Pay for Energy?
It should be remembered that the Price Cap of £1,928 per year is for typical usage and not the maximum you could pay.
Any actual costs are based on what energy, calculated by the Kilowatt Hour (KWH) you use and bills are calculated from that. From 1 January 2024 the price for gas will rise to 7p/kWh and electricity to 29p/kWh.
In addition, the average daily standing charge will be 53 p/day for electricity and 30 p/day for gas which remains the same as previously. This standing charge amount can vary dependent on the area you live.
Why is the Energy Cap Increasing?
OFGEM states that the increase in the price cap is due to the increase in the cost of wholesale gas in recent months, which in turn is due to world events including the conflict in the Middle East. However, wholesale gas prices are currently around 30% lower than they were at their peak due to the Russia Ukraine war.
Will People be Worse Off?
Recent increases in benefits and National Insurance tax reductions in the recent Autumn Statement announced by Chancellor Jeremy Hunt should help to offset some of these increases. However, any ‘feelgood factor’ with the expectation of more money in your pocket will soon evaporate with these further increases in energy costs.
The percentage increase in the Energy Cap is 5% and will take us to the end of the first quarter of 2024 when the Cap will be reviewed again and potentially increased further.
All eyes will be on OFGEM regarding the new Energy Price Cap and on the governments next Budget which will gear the UK up for a 2024 General Election. It is expected that further tax cuts could be implemented in the budget which may be viewed by some as a bribe. However, if it puts more money in to peoples’ pockets, who are we to complain!
It is to be hoped some pressure could be applied to OFGEM to reduce the cap or keep it the same going in to the second quarter of 2024 with an election upcoming.
Can a Tenant Save By Renting a Room?
One of the cheapest and most cost-effective ways to rent is to rent a room in a shared house. The main benefit is that the rent is reduced as costs are shared among more individuals and bills are usually included in the rent. This means that energy and council tax are usually included which, as well as making the rent more affordable, also makes it easier to budget on a monthly basis.
If you are a tenant searching for a room to rent, you can check our availability here. All enquiries are sent directly to the relevant landlord who should respond to you. You can also Register your details and we can contact landlords via our matching system.
For home owners and landlords with rooms to rent, please register here to post your adverts. If you have a Spare Room in your home this can be a great way of covering the increases in energy costs and help with the cost of living struggle. You can also find tenants looking for rooms to rent in our Rooms Wanted section.