Most British households will face higher energy bills from January after regulator Ofgem increased its price cap by 5% to reflect a rise in wholesale energy prices.
The increase comes as many Britons contend with a cost-of-living squeeze and the government continues to grapple inflation. Though inflation slowed sharply last month, that was partly down to lower energy costs.
Wholesale market price increases
The price cap rise “is a result of the wholesale cost of gas and electricity rising, which needs to be reflected in the price that we all pay”, Ofgem CEO Jonathan Brearley said in a statement. Gas prices usually rise in the winter alongside increasing demand, particularly for heating. However, wholesale prices have also been driven higher by global events such as the war in Ukraine, Ofgem said.
Charity groups warned many households could struggle with the higher costs, as less government support is available this winter. Most homes received £400 off their bills last winter when the cap was much higher.
Fuel poverty group National Energy Action said 1 in 4 people had struggled to pay energy bills in the last three months. Ofgem’s Brearley also said it could be a difficult time for some households but said people may now be able to find cheaper deals on the market.
Government support available
Government support is available for around 3 million vulnerable families eligible for the Warm Home Discount, worth £150 off bills and many of the most vulnerable are also eligible for £900 in cost-of-living support for 2023/24.
Ofgem’s new cap of £1,928 a year for average use of electricity and gas, is up £94 from the previous cap.
About 29 million customers are on standard rate tariffs covered by the price cap, which was introduced in 2019 to protect consumers.
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