Ofgem confirms average household energy bills to rise by £94 a year from January

The regulator announced it is raising its price cap from the current £1,834 for a typical dual fuel household to £1,928 from January 1, driven almost entirely by rising costs in the international wholesale energy market due to market instability and global events, particularly the conflict in Ukraine.

Ofgem chief executive Jonathan Brearley said: “This is a difficult time for many people, and any increase in bills will be worrying.

“But this rise – around the levels we saw in August – is a result of the wholesale cost of gas and electricity rising, which needs to be reflected in the price that we all pay.

“It is important that customers are supported and we have made clear to suppliers that we expect them to identify and offer help to those who are struggling with bills.

“We are also seeing the return of choice to the market, which is a positive sign and customers could benefit from shopping around, with a range of tariffs now available offering the security of a fixed rate or a more flexible deal that tracks below the price cap.

“People should weigh up all the information, seek independent advice from trusted sources and consider what is most important for them, whether that’s the lowest price or the security of a fixed deal.”

The energy price cap sets a limit on the maximum amount suppliers can charge households in England, Wales and Scotland for each unit of gas and electricity.

Energy in Northern Ireland is regulated separately.

The headline price cap figure is an average across households rather than an absolute cap on bills, so those that use more will pay more.

The announcement puts hopes for relief from the cost-of-living crisis on hold, and follows Chancellor Jeremy Hunt making no mention of any further help from the Government to offset household energy bills in Wednesday’s autumn statement.

Gillian Cooper, director of energy at Citizens Advice, said: “Prices going up during the coldest part of the year will make life harder for millions of people already struggling to pay their bills.

“We’re already helping record numbers with energy debt and we’re seeing more people than ever who can’t afford to top up their prepayment meter.

“Yesterday, the Government missed the opportunity to announce extra support for households who desperately need it this winter.

“The lack of action means far too many households will now be forced to choose between heating and eating this winter.

“We urgently need the Government to honour its commitment to look at options for providing targeted financial support with energy bills from April 2024.”

Simon Francis, co-ordinator of the End Fuel Poverty Coalition, said: “These price hikes come at the worst possible time for households.

“Bills will go up just as winter bites hard and household finances are hit further by Christmas credit cards, the long January pay period and the ongoing wider cost-of-living crisis.

“We warned Ofgem that a January price cap rise was a bad idea when the regulator consulted on this in 2022.

“Now the chilling effect of the change is being realised, the inhumanity of this policy is clear to see.

“It will be anything but a happy new year for people trapped in Britain’s broken energy system.”

Forecasts by energy consultancy Cornwall Insight suggest that the typical bill will fall back to £1,853 from the start of April, but will not drop below the current level until July next year.

Dr Craig Lowrey, principal consultant at Cornwall Insight, said: “Earlier this year, it seemed like the outlook for consumer bills was improving, with bills gradually falling after the dramatic rises post Russia’s invasion of Ukraine.

“However, as is often the case in the energy market, new challenges have arisen, and our reliance on foreign energy has once again left the UK vulnerable to price increases caused by events around the globe.

“With little in the way of direct energy bill support coming out of the autumn statement, consumers are likely to look at lowering energy usage to counteract high bills – particularly given that bills remain well above their historic averages.

“However, as we move through 2024, it’s not just the persistently high unit costs that will be a worry; the looming rise in electricity standing charges from April adds another layer to the equation.

“Fundamentally, the solution extends beyond tweaking energy bills, given the underlying cause of rising energy bills over the last 24 months.

“We need a long-term strategy that reduces our dependence on imports of energy – particularly gas.

“By investing in domestic renewable energy sources, we can start to break free from the international market fluctuations and stabilise our energy prices for homes and businesses alike.”