Families faced a new cost of living “hammer blow”on bills on Thursday after Ofgem said it would update the energy price cap every three months.
The regulator confirmed that the maximum tariff companies can charge for gas and electric will be updated quarterly, rather than every six months, meaning a huge price hike will hit not just in October but also again in the depths of winter on January 1.
Ofgem’s chief executive Jonathan Brearley today warned households they will endure a “very challenging winter ahead” with the cap forecast by analysts to rise to an average of £3,359 per year from October and then again to £3,616 in the new year.
Ofgem said the change would go “some way to provide the stability needed in the energy market”, adding: “It is not in anyone’s interests for more suppliers to fail and exit the market.”
But campaigners warned households will see a huge strain on budgets, forcing the vulnerable to cut down on heating in the heart of winter. Caroline Abrahams, charity director at Age UK, said: “Ofgem’s decision to move to quarterly price cap changes is a hammer blow to the millions of consumers already struggling to pay sky-rocketing bills.
“With household energy costs widely predicted to reach shockingly high levels from October, the decision to press ahead with yet another price cap change in January poses an enormous threat to the health of vulnerable older households across Britain.
“We are very concerned that a January price rise will hit consumers with a bill increase during the coldest period of the year, no doubt leading to many more people risking their health by turning their heating down or off altogether.”
Wholesale gas prices shot up nearly a third in the last week of July to reach the highest average cost since mid-March.
ONS data revealed that the National Grid saw the average price for gas increased by 31 per cent to 9.8p per kilowatt hour over the week to July 31.
National Energy Action director of policy and advocacy Peter Smith said: “Ofgem moving ahead now with passing price cap changes on to households quarterly rather than every six months wasn’t necessary and unfortunately means further significant price increases in January are inevitable.
“Average annual bills are already predicted to increase by £1,200 a year — a 177 per cent increase since last October.
“Now, householders can expect further hikes just after Christmas, in the middle of heating season when energy costs are typically at their highest.
“January is also usually a time of increased mental health problems and further hikes in bills will sadly lead to increased misery and huge anxiety.” Later in the day the Bank of England was expected to raise interest rates by 0.5 percentage points, which will add to the pain for mortgage payers.
Mel Stride, Tory chair of the Commons Treasury Committee, said: “As inflation goes up further, interest rates have to rise and that has a real consequence of people up and down the country. Every one per cent increase in interest rates means about £580 per month more on the average mortgage payment. So that’s something that will hit people very hard.”
Food and fuel costs are also expected to continue to spiral and there were today warnings from the National Institute of Economic and Social Research that the Retail Prices Index, which is used to set rail fares and student loans repayments, will hit 17.7 per cent later in the year.
Lib Dem Cabinet Office spokesman Christine Jardine MP said today marked “Black Thursday for millions of Brits” due to cost-of-living pressures and increasing recession risk for the UK economy.
Paul Tuohy, from the Campaign for Better Transport, called for train fares to be frozen amid fears they could skyrocket in the new year.
He said: “We need people to use the trains to help cut congestion and air pollution and stimulate economic activity in our towns and cities, but with a double-digit fare rise on the cards for next year, we are in very real danger of pricing people off the rails.
“The Government has helped out drivers with the cost-of-living crisis, now it’s time to help rail passengers with a fare freeze for 2023.”
