Your guide to how the energy price cap increase will affect your landlords and tenants

3 February 2022

The energy price cap increase on 1 April will add £693 on average to each household's bill in 2022. Estate and letting agencies need to be prepared to advise tenants and landlords on what this means for them and what support is available.

The energy price cap rises by 54% on 1 April 2022, affecting over 75% of households. This means an average £693 increase in energy bills to £1,971 in spring 2022. This latest jump is estimated to push more households over the fuel-poverty threshold as the energy crisis continues - with no signs of abating as the conflict in Ukraine pushes up wholesale gas prices even further.

Households on prepayment meters will see a larger increase of £708 from £1,309 to £2,017 per year. The government also revealed plans for households to receive up to £350 to reduce the pressure of the rising cost of living, with a £200 rebate the energy bills of domestic electricity customers. 

Why has the price cap increased?

The price cap is Ofgem's way of ensuring energy prices remain fair for both the consumers and providers, factoring in market circumstances. Currently, the cost of wholesale gas is high.

The price cap has effectively limited how much of this cost energy suppliers could pass on to their customers, resulting in some suppliers failing.

The previous increase in October 2021 and this new increase in April reflect the average rise in the costs that suppliers pay for the fuel in the first place.

Cornwall Insights has predicted that the next price cap increase in October will push energy bills to over £2,900 a year for the average energy user.

We are of course only partway into the measurement period where wholesale costs are evaluated for the next price cap announcement - so the coming months are critical to see whether Cornwall Insights analysis holds true.

Ofgem has additionally announced that, from October 2022, it will start to review its price cap quarterly, rather than every six months - and that the cap will likely increase to £2,800 from that date.

This will help customers see the benefit sooner when the prices drop from record highs - but will also mean that jumps in wholesale costs will also be passed to households much faster, so you'll need to monitor these regular changes to ensure you understand how they may affect your customers.  

How will the price cap increase affect my tenants and landlords?

The number of tenants requiring guarantors as affordability ratios shift in referencing is already growing as average rents are on an upward trajectory.

Now, the energy price cap increase will add to each household's bill. These factors, amongst others, mean that the cost of living will rise.

A January Opinions and Lifestyle Survey found that 66% of respondents said their cost of living had gone up in the last month, with 79% attributing this to higher gas and electricity bills - and could potentially be the difference between your tenants paying the rent or falling into arrears.

Reports suggest that the energy crisis could take up to three years to resolve, with the number of households in fuel poverty projected to rise from four to six million.

That figure is from research undertaken before the Ukraine conflict took hold. Agents will therefore need to take a long-term view in supporting their customers throughout.

How can I advise my tenants?

Your tenants need to understand how much the increase will affect them, and what actions they can take to lessen the impact of this price increase.

Ofgem shares that this price cap increase will affect "default tariff customers that haven’t already switched to a fixed deal and those who remain with their new supplier after their previous supplier exited the market."

  • If they are on a fixed-term tariff, it would be wise to stay put until the end of the contract, as they're unlikely to find a better rate on a new tariff
  • If your tenants are on a default or variable tariff, these will be affected by the price cap. New fixed deals are currently available at similar prices to the new price cap.

There are sites helping tenants to find ways to become more energy efficient in homes.

You can also ensure that they're aware of the financial support available - including the new Energy Bills Rebate - if they struggle to pay their energy bills, especially during the winter months.

You can share a more detailed overview with your tenants on what the energy price increase means using our free FAQ email templates.

How can I advise my landlords?

Energy efficiency improvements

Energy efficiency is already high on the government's agenda, with its Net Zero by 2050 target and the recent announcement of its strategy to move away from carbon-based forms of energy production, towards heat pumps and other solutions.

Proposals to increase minimum energy efficiency standards mean that landlords will need to invest to increase their Energy Performance Certificate ratings to minimum rating of C on all new and existing tenancies by 2028.

Taking a step by step approach will spread the cost of making these improvements, and ensure your landlord saves money during the void period.

Void management

During the void period, you need to make sure that your agency and its landlords know who is paying the bills.

Taking accurate metre readings is essential, so you only pay for the energy you use.

This can also help avoid receiving bill estimates which assume the property is occupied and therefore more energy is being consumed.

Rent arrears

If the price cap and increase in energy prices has an impact on your tenants' ability to pay rent, after advising them on the financial support available you should consider implementing a payment plan to tide the tenant over until the summer months when they will be using less energy.

For instances where mutually agreeing to a payment plan doesn't work, offering your landlords a rent protection option can help to give them peace of mind that they can continue to receive their income, even if their tenants are unfortunately unable to pay their rent.

To answer more of your landlords questions on this price cap increase, you can download and share our free FAQ email templates.

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