The energy price cap, which regulates the amount that 24 million households pay for their gas and electricity, will jump by around 80% from this autumn, regulator Ofgem has announced.
The price cap on energy bills was introduced in January 2019 as a way to ensure that households that are not bills-savvy are not ripped off by their energy suppliers. Twice a year, energy regulator Ofgem would set the maximum price that households on their supplier’s default tariff would have to pay for every unit of gas and electricity they used for the next six months.
But this year, Ofgem introduced a change - for the price cap to be changed twice as often, so four times a year instead. It previously said the move would help pass on savings from a potential fall in gas prices to customers more rapidly, while protecting under-pressure energy suppliers from being damaged by the cap.
The price cap works by limiting how much the average home pays for power every year, if they pay by direct debit on a variable rate tariff. But the 80% rise announced on Friday will push the cap to £3,549 per year for the average household - the highest it has ever been.
Charities, think tanks, opposition parties and potential future Prime Ministers have said the government will need to do more for struggling households. But any extra support will have to wait until the next Prime Minister is in place.
The current government has said that it is exploring the options and will present them to the new Prime Minister when he or she comes into office next month.
The new cap level will come into force on Saturday October 1. The price cap will be changed again in January, April, July and October 2023.
Experts expect the cap to rise significantly in January and again in April, and then to fall back again in July and October next year.
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