Energy bills to increase by almost £150 after Ofgem raises price cap by 10 per cent

Households in Britain will face higher energy bills this winter after the regulator raised the price cap by 10 per cent.

Ofgem announced that the average home energy bill will increase from £1,568 to £1,717 on 1 October. It means a typical household’s annual energy bill will rise by £149.

The regulator sets the price limit for each unit of energy used based on several factors including wholesale energy prices – the amount energy providers pay for gas and electricity before supplying it to households.

The limit changes every three months – in January, April, July and October. Energy prices have fallen twice this year – in April and July – but are set to move back up.

Those on standard variable tariffs paying by direct debit will pay on average 24.5p per kilowatt hour (kWh) for electricity and a daily standing charge of 60.99p, and 6.24p for gas with a standing charge of 31.66.

Nevertheless, average bills remain 6 per cent lower than a year ago and considerably lower than during the peak of the energy crisis , which was fuelled by Russia’s invasion of Ukraine, driving up costs in an already-turbulent energy market to a high of £4,059 in the first quarter of 2023.

Urging consumers to “shop around” and consider opting for a fixed-rate tariff, Ofgem chief executive Jonathan Brearley said: “We know that this rise in the price cap is going to be extremely difficult for many households.

“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.”

He added: “We are working with government, suppliers, charities and consumer groups to do everything we can to support customers, including longer-term standing charge reform, and steps to tackle debt and affordability.”

Cornwall Insight also said there is likely to be a further “modest” increase in January 2025, with more rises possible early in the new year due to escalating tensions in the Russia-Ukraine war.

Jess Ralston, head of the Energy and Climate Intelligence Unit, said bills in winter will be about 50 per cent higher than they were pre-crisis on average.

“A lack of progress on energy efficiency and heat pumps means that our reliance on gas hasn’t fallen much in recent years, despite the volatility in the international markets forcing bills to skyrocket,” she said.

“With the removal of the winter fuel payment for some pensioners at the same time as bills going up, it’s likely that some will struggle and it remains to be seen if the government will bring in measures to support those worst hit by the removal of winter fuel payment.”

The new government decided to stop winter fuel payments for those who are not in receipt of pension credits or other means-tested benefits, in the first change to the benefit since it was introduced in 1997 for all pensioners.

The Treasury said the changes would see the number of pensioners receiving the payments of up to £300 fall from 11.4 million to 1.5 million – so just under 10 million people would miss out.

The government has since urged pensioners to check that they are claiming pension credit , with an estimated 800,000 pensioners not claiming the benefit despite being eligible. Pension credit tops up the weekly income of all people aged 66 and over to £218.15, or £332.95 if in a couple.

A Labour spokesperson said: “This price increase is the harvest of 14 years of Tory neglect and failure to prepare and invest in British-owned clean energy.

“The Labour government has hit the ground running to tackle the root causes of high energy prices. In under 50 days we have set up Great British Energy to cut bills for good, lifted the onshore wind ban, consented unprecedented amounts of solar power and have set the largest-ever budget for our renewables auction.

“Labour’s bold energy plans will warm homes across the country, cut energy bills for good and create thousands of high-skilled, well-paid jobs as we move towards cheaper, homegrown clean power.”

Warning that energy price rises are driven by international gas price rises and that the UK will “be in this world until we build out of it”, Mr Brearley said: “Until we build different infrastructure that gets us a different energy system, what we all need to do is to make the best of the circumstances we’re in and look after the most vulnerable customers.”

The Lib Dems said ministers must take “urgent action” to address the “Conservative Party’s legacy”. But Tory shadow energy secretary Claire Coutinho said: “Instead of prioritising cheap energy, the new Labour government are pursuing Ed Miliband’s reckless net zero targets with no thoughts to the costs.”

Campaign group Warm This Winter accused energy companies of “profiteering”, with 20 firms making more than £470bn in profits since 2020. “That shows there is money in the system but that is going to energy bosses and their shareholders when it needs to go to ordinary people,” a spokesperson said.

Urging ministers to come up with a plan to support households this winter, the End Fuel Poverty Coalition said: “Ending energy debt, extending the household support fund, expanding warm home discounts and evolving standing charges would all help mitigate the impact of high bills and the axe to the winter fuel payment.

“But as well as support this winter, the public need to see a clear timetable for when the very real benefits of cheaper renewable energy and the warm homes plan will kick in.

“To add insult to injury, in the detail of today’s Ofgem announcement is the fact that the profit margins energy suppliers are allowed to make will increase by 11 per cent.

“Add to this that every month we hear about more massive profits for firms in the wider energy industry. It’s time to tax these firms fairly – not just the fossil fuel producers – and use the money to keep people warm now and in the long term.”