Ofgem has announced household energy bills will rise slightly by 1.2 per cent from New Year’s Day. The sector regulator confirmed on Friday morning that annual energy bills for millions of households on the standard tariff, with typical average usage, will rise from £1,717 to £1,738 from January 1 – an increase of £21 over the coming year.
It’s crucial to remember that the price cap does not limit a household’s total bills, people still pay for each unit of gas and electricity they use. This means the more energy you use, the higher the bill, similarly, the less you use, the lower the bill and even if you went a whole year without using gas or electricity, the daily standing charges alone cost around £338.
You are covered by the energy price cap if you pay for your electricity and gas by either:
- standard credit (payment made when you get your electricity and gas bill)
- Direct Debit
- prepayment meter
- Economy 7 (E7) meter
The energy price cap was introduced by the UK Government in January 2019 and sets a maximum price that energy suppliers can charge consumers in Scotland, England and Wales for each kilowatt hour (kWh) of energy they use.
Ofgem changes the price cap for households every three months, largely based on the cost of energy on wholesale markets. The price cap starting on January 1 will be in place until March 31, 2025.
Energy prices are still expected to fall slightly in both the second and fourth quarters of next year, according to industry analysts at Cornwall Insight.
Craig Lowrey, principal consultant at Cornwall Insight, said: “Supply concerns have kept the market as volatile as earlier in the year and additional charges have remained relatively stable, so prices have stayed flat.
“While we may have seen this coming, the news that prices will not drop from the rises in the autumn will still be disappointing to many as we move into the colder months.”
He called for the UK Government to help protect the vulnerable and tackle energy supply for the long term.
Mr Lowrey said: “With it being widely accepted that high prices are here to stay, we need to see action. Options like social tariffs, adjustments to price caps, benefit restructuring or other targeted support for vulnerable households must be seriously considered.”
He added: “The Government needs to keep momentum on the transition while acknowledging that immediate support is essential for those struggling now. Inaction is a choice to leave people in the cold.”
Ofgem is also currently considering the future of price protection, including the suitability of the price cap and a potential permanent ban on so-called acquisition tariffs – cheaper prices for new customers to lure them away from their existing supplier.
Charities have voiced their concerns over another price rise, with National Energy Action saying the current cold spell was already having a devastating impact on the most vulnerable people.
David Southgate, policy manager at disability equality charity Scope, said: “This is a bitter pill to swallow for the many disabled people who face sky-high bills because they have no choice but to use more energy.
“Life costs a lot more when you’re disabled, because of needing to use more heating to stay warm and healthy, or charging vital equipment like wheelchairs and breathing machines.
“Our disability energy support services are hearing from disabled people who have cut back everything they can and racked up huge amounts of debt.
“The Government urgently needs to step in and bring in discounted energy bills for disabled people.”