Energy bills will go up by £149 a year in October, energy regulator Ofgem said today.
The watchdog set the new price cap for average annual gas and electricity bills at £1,717, a rise of 10% from £1,568 previously.
The new higher cap on default tarrifs will come into force on October 1 just as millions of householders are turning on their central heating for the first time this Autumn.
It also comes after Labour scrapped the winter fuel payment worth up to £300 for all pensioners in England and Wales except those on pension credit or other means tested benefits.
Chancellor Rachel Reeves has estimated the move will save the Treasury around £1.4 billion a year.
The main factor driving prices back up again is a rebound in wholesale energy prices since they hit 30 year lows in February.
The cap set by Ofgem every quarter is the highest tarrif that a household on a default standard variable deal can pay. How much their actual bill is depends on their useage.
There are around 27 million energy customers on standard variable tarrifs in the UK with around five million on fixed deals who will not be affected in the short term by today’s announcement from Ofgem.
The regulator pointed out that average bills would still be 6% cheaper than the same period last year and 49% lessless than in 2022 during the energy crisis, when the Government introduced an emergency Energy Price Guarantee at £2,500 a year.
Secretary of State for Energy Security and Net Zero Ed Miliband said: “This will be deeply worrying news for many families. The rise in the price cap is a direct result of the failed energy policy we inherited, which has left our country at the mercy of international gas markets controlled by dictators.“The only solution to get bills down and greater energy independence is the government’s mission for clean, homegrown power. That's why we have hit the ground running, lifting the onshore wind ban, consenting unprecedented amountsof solar power and setting the largest ever budget for our renewables auction.“We will also do everything in our power to protect billpayers, including by reforming the regulator to make it a strong consumer champion, working to make standing charges fairer, and a proper Warm Homes Plan to save families money.”
Ofgem CEO Jonathan Brearley, , said: “We know that this rise in the price cap is going to be extremely difficult formany households. Anyone who is struggling to pay their bill should make sure they have access to all the benefits they are entitled to, particularly pension credit, and contact their energy company for further help and support.
“I’d also encourage people to shop around and consider fixing if there is a tariff that’s right for you – there are options available that could save you money, while also offering the security of a rate that won’t change for a fixed period.
“We are working with Government, suppliers, charities and consumer groups to do everything we can to support customers, including longer term standing charge reform, and steps to tackle debt and affordability.”
Gillian Cooper, Director of Energy at Citizens Advice said: “We’ve braced ourselves for a challenging winter but today’s price cap increase will no doubt see even more people fall behind on their energy bills.
“Our research shows people are so worried about price increases that one in four say they could be forced to turn off their heating and hot water this winter. We’re particularly concerned about households with children and young people and those on lower incomes, who are most likely to struggle with their heating costs.
"Energy bills will now be around two thirds higher than before the crisis, and with record levels of energy debt and the removal of previous support, people are in desperate need.”
Dr Craig Lowrey, Principal Consultant at Cornwall Insight, warned bills are likely to go up again, by around 3%, in January when the cap is next reset.
He said: “As we move into the colder months, a lift in bills, while expected, is certainly not welcome. Unfortunately, a volatile wholesale market, and a country heavily reliant on imported energy has created a perfect storm for fluctuating household bills.”
Meanwhile the think tank Ideal Economics is today published a report demanding a fresh CMA investigation of the supply of gas and electricity to small businesses.
The report’s author David Osmon, said “The energy market is completely broken as far as small businesses are concerned.They pay far much too much for their gas and electricity and many struggle even to find an energy supplier. Ofgem knows that and promised to refer it to the CMA 18 months ago yet hasn’t done so.
“Either the CMA should make the reference itself or Ed Miliband should, as the minister responsible for reducing energy bills.”
