Energy bills are set to go up in the New Year after the industry regulator raised the cap on gas and electricity prices by 5%.
Ofgem said the annual dual fuel bill for the average household will go up by £94 to £1,928 from January 1 until the end of March.
The price cap is the maximum that energy suppliers can charge customers who are on standard variable tariffs
Ofgem said the increase in tariffs is "driven almost entirely by rising costs in the international wholesale energy market due to market instability and global events, particularly the conflict in Ukraine."
CEO 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 tar-iffs 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 next quarterly price cap announcement will be announced in February 2024, covering April to June 2024 next year.
Dr Craig Lowrey, Principal Consultant at energy advisers Cornwall Insight said: “Amid the cost-of-living crisis, the last thing households need is a rise in energy bills – especially going into the winter months.
"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. "
David Cheadle, acting chief executive at the Money Advice Trust, the charity that runs National Debtline, said: “The rise in the energy price cap will only add to the pressure on households already saddled with unaffordable energy debts - without help, many will be left out in the cold this winter as they struggle to heat their homes.
“With household finances still under stress, more people will face impossible choices in the New Year as budgets no longer stretch to meet their essential costs.
“The absence in yesterday’s Autumn Statement of any further help with energy costs was disappointing. With one in four people with energy debts currently unable to pay, the need for a Help To Repay Scheme will only increase.
“Anyone who is worried about paying their energy costs should seek free, independent advice as soon as possible. Our advisers at National Debtline are here to help and can take you through your options.”
National Energy Action Chief Executive Adam Scorer said: "‘Yesterday in the Autumn Statement, there was zero direct support for households struggling with sky-high energy bills.
"Today Ofgem announces from January those bills will be even higher as typical households will be paying £100 more - just after Christmas and as the weather will get even colder. For those already saddled with paying back the £2.6 billion of household energy debt or self-disconnecting from energy to avoid that debt it's devastating and this increase will mean millions will struggle in cold and unsafe homes.’
"This comes after yesterday’s Autumn Statement, which had no additional support, despite our new polling with YouGov showing that one in four (26%) of UK adults have found it difficult to afford to pay their energy bills in the past three months. That’s equivalent to 11 million people.
"At first glance, it might look like prices are only increasing slightly, but they are not. That’s because Ofgem has just changed how it calculates ‘typical use’. Just three months ago this was a 2 to 3 bedroom household using 2,900kWh of electricity and 12,000kWh of gas a year. Now it’s based on a household using 2700kwh of electricity and 11500kwh of gas. It’s important to note the price cap isn’t a cap on the total bill but on the price per kWh of energy.
"Ofgem says the reason for using lower ‘typical usage’ figures is that energy use is lower. For some, this may be because of increasing energy efficiency. However, many of our clients are using less energy because they cannot afford to turn the radiators on, cook a hot meal or have a warm shower.
"Their homes are no longer comfortable and safe places to be. Many have damp and mould and their physical and mental health are seriously affected. There is still time for the UK government to act, but that time is fast running out."
Christian Deilmann, Chief Product Officer and Co-Founder of smart thermostat firm tado said: “Today’s price cap rise shows people should not have been complacent this winter about energy costs compared to last year because they remain very high.
“Last year’s price shocks really focussed people’s minds about their household bills but the cost of living crisis is ongoing and it is never too late to make your house energy smart and start saving money.
“The price cap rise overall is 5 per cent but the kWh gas component is actually 7.7 per cent so while there is no silver bullet, targeting your heating costs with a smart thermostat is an obvious win."
