Households in Great Britain will begin the run-up to winter with a 10% increase in their energy bills after the industry regulator increased its cap on gas and electricity prices from October.
Under the new price cap, the average annual dual-fuel energy bill will rise to £1,717 a year, up £149 from its current level of £1,568, which has been in place since July.
The price cap is set every quarter by Ofgem, the energy regulator for Great Britain, and imposes a maximum on how much suppliers can charge their 28 million household customers per unit of gas and electricity.
It is expressed in terms of how much the average home would pay at this rate for their typical annual energy use, which means a cold autumn and winter could push bills even higher if households need to keep the heating on for longer.
The new cap is 6% lower than in the same period last year, when it rose to £1,834 between October and December. However, bills will remain well above the cap set before Russia’s war on Ukraine triggered a global energy market shock, when it was set twice-yearly and the winter price was £1,216.
Ofgem said the main drivers behind the increase – equivalent to about £12 a month – were international energy market price rises due to heightened political tensions and extreme weather events.
Its chief executive, Jonathan Brearley, urged consumers to “shop around” and consider opting for a fixed-rate tariff that could save people money. He said: “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.”
The regulator revealed the price cap weeks after the chancellor, Rachel Reeves, set out plans to restrict the winter fuel allowance. Reeves said it would no longer be universal and only pensioners on means-tested benefits would qualify this winter.
The allowance, which is worth between £100 and £300, was paid to 11.4 million pensioners in 8.4 million households in the winter of 2022 to 2023. The changes are expected to leave hundreds of thousands of pensioners facing significantly higher energy costs over the colder months, according to fuel poverty campaigners at National Energy Action.
Ofgem also revealed on Friday the options it was considering after a consultation launched last November on much-criticised energy standing charges, which every household pays regardless of how much energy they use. Some of the cost could be moved to the per-unit price instead, but the regulator warned that this could raise energy bills by 10% for 500,000 poorer households and would hit vulnerable households who need to use more energy.
Gillian Cooper, the director of energy at Citizens Advice, said: “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.
“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.”
Juliet Phillips, of the thinktank E3G, said the budget, on 30 October, offered an opportunity to “fix our broken energy system” and she hoped to see targeted energy bill support for low-income homes. “Longer term, the UK needs to squeeze gas out of the power system, scaling up investments in renewables and low-carbon energy storage,” she said.
Adam Khan, the principal analyst at the thinktank Common Wealth, said the government’s planned state energy company, Great British Energy “can be part of the solution by both lowering and more equitably distributing costs, but to do this it needs greater ambition including a retail arm, more capital, and genuine public ownership”.
Brearley said energy price rises were driven by the increase in cost in international gas, and the UK would “be in this world until we build out of it”. He told BBC Breakfast: “This situation of being subject to the volatile gas markets is something that may last a long time, and that’s why we need to work with the government, with the sector, to protect vulnerable customers this winter. But we need something more sustained and more strategic.”
The energy secretary, Ed Miliband, said: “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.”
