The energy market is already incredibly opaque, even without this added layer of confusion. Why? First, the poorly-named “price cap” is not a cap at all. It only limits the rate charged for each unit of energy. The headline figure we see is based on the average household. And the rates are reviewed twice a year, so the “cap” does not last for very long.
Bills went up by 12pc in October and are expected to rise by as much as 50pc in April, followed by a further 25pc hike later this year. If the price cap is lifted to £2,400 in October, as expected, that would mean energy bills have doubled in a year.
Another great puzzle is that most of your energy bill doesn’t pay for energy at all. Wholesale costs – the ones that have been rising since the summer, pushing up energy prices – only account for about a third of the average dual fuel bill. A quarter goes on network costs – the pipes and cable that transport the energy – with almost a fifth going on the provider’s operating costs. A full 15pc goes on green levies while 5pc goes on VAT. The last small chunk pays for other costs such as sales brokers and meter installation.
As the cost of living crisis escalates, the Government may intervene to alleviate some of the pressure of runaway energy bills. Until then, you will have to find your own ways to keep your bills down. Signing on to expensive fixed-rate deals, encouraged by shameful suppliers, is not one of them.
lauren.davidson@telegraph.co.uk