Energy Bills Set to Rise: Ofgem Announces New Price Cap
Household energy bills are expected to climb significantly after the energy regulator, Ofgem, announces its new price cap later today.
The price cap, which sets a limit on the amount suppliers can charge for default tariffs, will be revealed at 07:00 BST. It is widely anticipated that the cap will rise by around 9%, or £150, for a typical household using a standard amount of gas and electricity annually.
This increase will affect the 28 million homes in England, Wales, and Scotland, impacting the price paid for each unit of gas and electricity consumed. While energy prices governed by the cap have seen two reductions this year - in April and July - they are now poised to rise again, approaching the levels seen last autumn.
Consultancy Cornwall Insight, renowned for its accurate predictions, estimates that a typical household's energy bill will reach £1,714 per year from October. This represents a £146 rise compared to the current typical annual bill of £1,568, the lowest seen in two years.
Despite these lower prices compared to the peak of the energy crisis, they remain considerably higher than pre-pandemic levels. Moreover, government financial support has either been phased out or is being reduced.
The final cost-of-living payment was distributed to eight million individuals receiving means-tested benefits in February. The new government has also announced the cancellation of winter fuel payments for 10 million pensioners in England and Wales this autumn. The payment is a devolved matter in Scotland and Northern Ireland.
This confluence of factors is causing concern for households already struggling with energy debt. Dame Clare Moriarty, chief executive of Citizens Advice, warns of a "challenging winter" ahead.
"The price cap increase will see a wave of households tipped into debt, billpayers forced to make impossible decisions to make ends meet, and families worried about the impact the cold will have on their loved ones," she stated. "Energy prices might be down from the peak of the crisis, but with many already in the red and the removal of previous support packages, there's still no light at the end of the tunnel for those in desperate need."
While the price cap is adjusted every three months, Ofgem illustrates its impact in terms of an annual bill for a typical household. Larger properties, consuming more energy, tend to have higher overall bills, while smaller properties with lower energy usage generally pay less.
Standing charges, a fixed daily fee covering connection costs, currently stand at 60p per day for electricity and 31p per day for gas, although rates vary by region. Ofgem is currently considering potential changes to the standing charge billing system.
For low-income pensioner households, claiming pension credit is crucial, as an estimated 880,000 eligible households fail to do so. The government highlights that pension credit is worth an average of £3,900 per year and can unlock access to other financial support, including winter fuel payments.
Individuals can assess their eligibility for pension credit using the government's online calculator. Detailed information on how to make a claim is also available online, alongside a dedicated phone line (0800 99 1234) operating on weekdays.
The independent MoneyHelper website, backed by government, offers guidance on benefits, eligibility requirements, and how to address any issues. Benefits calculators are also provided by Policy in Practice, as well as charities Entitledto and Turn2us.
