The average annual energy bill in England, Scotland and Wales will increase to £1,738 from January, heaping further pressure on household finances, as the price cap rises by 1.2%.
The energy regulator Ofgem said its quarterly cap would go up by £21 a year, or about £1.75 a month, for a typical household’s gas and electricity use.
The increase for the January-March cap comes on top of a 10% rise for the October-December period, when it was £1,717 a year.
As temperatures drop during the winter, consumers also face a squeeze from rising mortgage costs and higher inflation as well as threatened price rises by retailers as a result of changes made in last month’s budget.
The price cap is set every three months by Ofgem, the regulator that covers Great Britain, and is the maximum suppliers can charge their 26 million household customers for each unit of gas and electricity.
The annual figure represents the average use in a British home. However, consumers may pay more depending on their usage.
Ofgem said the new cap would be £190 cheaper compared with January 2024 and 57% less than in January 2023, during the energy crisis. But bills will remain far higher than the £1,216 cap before Russia’s invasion of Ukraine in February 2022, which sent gas prices soaring and threatened to push energy bills above £4,000.
Millions of pensioners will no longer receive the winter fuel allowance this year after the government decided to means-test the benefit.
Modelling released by the Department for Work and Pensions on Monday estimated that the change would push 50,000 more pensioners into relative poverty next year, and an additional 50,000 by the end of the decade.
Caroline Abrahams, the charity director at Age UK, said: “Older people, struggling without their winter fuel payment, who were praying for a reduction in energy prices to help them in the new year, will be bitterly disappointed today.”
Alex Belsham-Harris, the head of energy policy at Citizens Advice, said: “As colder weather sets in, we’re particularly worried about households with children and those on lower incomes, who are most likely to struggle with their heating costs.
“Without government action, millions are at risk of being left in the cold this winter and beyond. We’re calling for the urgent introduction of energy bill support that is targeted at people who need it most.”
Keir Starmer has said it “makes sense to make the change” to winter fuel payments. He said it was “important to protect pensioners who most need the allowance” and urged people who were eligible for pension credit to take it up.
Cornwall Insight, an energy consultancy firm, predicted bills would reduce by 1.4% from April, falling to £1,713 a year.
Dr Craig Lowrey, the principal consultant at Cornwall Insight, said: “This latest increase in the price cap underlines the continuing volatility of the energy market, which is still experiencing the lingering effects of the energy crisis.”
He added: “There’s little point in waiting for the market to settle on its own – there’s no going back to so-called ‘normal’ prices, unfortunately. This is the new reality.”
Tim Jarvis, the director general of markets at Ofgem, said: “While today’s change means the cap has remained relatively stable, we understand that the cost of energy remains a challenge for too many households.
“However, with more tariffs coming into the market, there are ways for customers to bring their bill down, so please shop around and look at all the options.”
Ofgem said 1.5 million households had switched energy tariff in the past three months, and that savings of up to £140 were available.
The regulator encouraged more consumers to consider fixed tariffs, which are contracts that keep gas and electricity prices at an agreed level across a set period, typically a year, and means consumers are protected from price rises but also do not benefit if the price drops lower.
It also called on customers paying their bills by standard credit to look at switching payment method to save money. Such a switch could save about £100 a year, Ofgem said.
About 3 million people use standard credit to pay for their energy, which requires customers to pay providers on receipt of their bill.
