Energy bills to stay high until end of 2027 - one thing to do now to save money

Millions of households are set to see their energy bills rise due to the Middle East conflict after the new energy price cap kicked in on Wednesday.

The regulator Ofgem’s price cap sets the maximum amount firms can charge homes on standard tariffs per unit of gas and electricity.

Based on the new cap on gas and electricity rates, the average bill will increase by £221 to £1,862 a year in July, up from £1,641 in April.

Sir Keir Starmer’s much-delayed Defence Investment Plan had one big bet at its heart: drones are the future of warfare.

American company Anduril makes the “Seabed Sentry“- a weighted cylinder that uses sensors and AI to monitor what is happening under the sea. They could be used to listen out for spying and sabotage by Russian submarines. They are far cheaper than crewed submarines using traditional sonar.

A dozen of the cylinders can be dropped onto the seabed at a time by an autonomous submarine, with the devices forming a network which communicate between themselves and listens out for undersea activity.

The UK is woefully unprepared with the Royal Navy in a desperate condition. Whoever sits in Downing Street come next September will need to address matters of defence, homeland and cyber defence especially, with urgency.

Officials have drawn up contingency plans to cut further green levies from energy bills if prices remain high this winter, The i Paper has been told.

Several options are now circulating among Burnham’s transition team who are believed to be weighing up how to deliver on that pledge. A Treasury source said work on a package was ongoing to help with rising costs.

Burnham could remove remaining green levies from energy bills, funded through general taxation instead.

One proposal would be to raise the bank surcharge from its current 3 per cent.

Replace stamp duty, loosen fiscal rules and tax the capital gains uplift on inherited assets.

A written statement published by the Chancellor said the remaining sum would be “confirmed at Budget 2026, in a fair and balanced way”.

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Vertical Aerospace is still testing the aircraft and it will need to be approved by both the approval from the UK Civil Aviation Authority (CAA) and the European Aviation Safety Authority (EASA). But the company says the aim is for air taxis to become as cheap and convenient as ordering an Uber to the airport.

While Ofgem is updating its definition of a typical consumer from July to reflect falling household energy use, which adjusts the headline figure to £1,654, analysts at Cornwall Insight said that represented “little change” on a like-for-like basis.

Global energy prices are expected to remain high throughout 2027 due to the US-Israel war in Iran, with soaring wholesale costs hitting homeowners.

Around 5.3 million households on standard tariffs, who don’t have smart metres, could be overcharged for energy they have already used.

Standard – or default – tariffs can can see energy prices can go up or down.

Uswitch urged consumers who don’t have a smart meter to submit their latest readings on or around 1 July to ensure they are billed the correct amount.

Ben Gallizzi, energy spokesman at Uswitch, said: “There are two crucial things you should add to your to-do list for the coming days – submit a meter reading and get a cheap, fixed energy deal.”

Around 60 per cent of UK households are on a default energy tariff, known as a standard variable tariff (SVT).

Anyone who hasn’t switched tariffs over the last 18 months is almost certainly on a standard tariff and paying more than they need to, said Sabrina Hoque, energy expert at Uswitch.

“Using the new average consumption figures, the cheapest fixed deal on the market comes in at £1,382 a year for a typical usage household – 17 per cent or £281 below the standard rates”, she said.

“Locking in a fixed tariff now means protecting yourself not just today, but through autumn and winter when heating use is at its highest and energy costs hit household budgets hardest.”

Consumers were also urged to hang clothes outside to dry rather than use tumble dryers during warmer months.

Bill payers were also advised also turn off their thermostats over summer to avoid accidental heating costs on warmer days.

A spokesperson for Cornwall Insight predicted a slight fall in October’s price cap.

But ongoing uncertainty around the Middle East meant the energy market was not going down as much as consumers may hope, they added.

“We are expecting in January for them to go further down than October, but we’re still talking a couple of hundred pounds more than what they were in January and March,” the spokesperson said.

“If there’s a ceasefire, if the market calms down, the prices may go down further, alternatively, if it gets worse, prices may go up.”

Confusion over the reopening of the Strait of Hormuz, patchy progress of peace talks and uncertain repair timelines to key regional infrastructure mean prices remain high, if less volatile than in the Spring, said Dr Craig Lowrey, principal consultant at Cornwall Insight.

But even a small fall in October’s price heading into winter would see household finances being hit harder than the latest increase which falls over summer.

He added: “While July’s higher prices will be cushioned by warmer weather and lower household energy use, the October cap lands as people switch their heating back on and will have a greater impact on household finances.”

This week’s roughly 13 per cent increase from the previous price cap in April is still well below the highs seen at the start of the war in Ukraine from 2022.

Data from Ofgem shows the price cap soared to £4,279 at the start of 2023, with the then-Conservative government intervening to support households.

Its package included a £2,500 cap on annual bills and a £400 payment for all households, and more targeted support for pensioners and those on benefits.

But the measures cost the taxpayer around £75bn over two years.

Lowrey said the Government has several options available to support households.

A new prime minister – expected to be Andy Burnham – may be open to introducing targeted support for more vulnerable households if prices remain high, he said.

Chancellor Rachel Reeves has said any support would be focused on ”those who need it most” if energy bills spiral rather than the blanket discounts offered to all households in 2022.

The Tories have also pressed Reeves to scrap VAT on fuel during the current energy crisis, which it says can be funded by axing renewable energy schemes and green levies.

Campaigners from the End Fuel Poverty Coalition called for the next prime minister to “fast-track the electrification of the UK” and bring in an energy social tariff to lower bills.

This year, the Government unveiled its Warm Homes Plan vowing to tackle the “national emergency” of rising energy bills.

The plan would focus on funding solar panels, heat pumps and batteries for households through low- or no-interest loans and grants.

Officials have estimated that a three-bed, detached house with solar panels and a heat pump could save £550 a year.

But even with the grants there would be additional costs for installation, with a heat pump after the subsidy costing households on average £5,000.

The Government extended the Warm Home Discount to provide eligible households with a one-off £150 rebate on their electricity bills every winter until 2030.

A spokesperson for Cornwall Insight said: “That will just continue. Obviously, it won’t have as as big an impact if prices are higher.”

The End Fuel Poverty Coalition called for the discount to be increased from £150 to £400.