Households to face higher energy bills this winter as price cap set to rise

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Andrew Feinberg

White House Correspondent

Households in Britain are set to face higher energy bills this winter with the regulator expected to increase the price cap after lowering it twice this year.

Experts predict Ofgem will announce on Friday that the average household energy bill will rise by about 9% in October when the latest change takes effect.

Energy consultants Cornwall Insight said it expects the typical household’s energy bill to rise to £1,714 a year, up from £1,568 currently, on October 1.

The regulator sets the price limit based on several factors including wholesale energy prices – the amount energy firms pay for gas and electricity before supplying it to households. It is updated every three months.

It means households could be going into the colder months facing higher bills than they have had from April this year, when the price cap was lowered.

Nevertheless, average bills remain considerably lower than during the peak of the energy crisis, which was fuelled by Russia’s invasion of Ukraine in February 2022, driving up costs in an already-turbulent energy market.

The expected £1,714 a year would be £120 less than the price cap in October last year, when it was £1,834.

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.

The price cap sets a maximum price that energy suppliers can charge consumers in England, Scotland and Wales for each kilowatt hour (kWh) of energy they use.

It means it does not limit a household’s total bills, because people still pay for the total amount of energy that they use.

The figures provided by Ofgem indicate what a household using gas and electricity, and paying by direct debit, can expect to pay if their energy use is typical.

Earlier this week, Craig Lowrey, principal consultant at Cornwall Insight, said the announcement will not be the “news households want to hear when moving into the colder months”.

“Following two consecutive falls in the cap, I’m sure many hoped we were on a steady path back to pre-crisis prices,” he said.

“However, the lingering impact of the energy crisis has left us with a market that’s still highly volatile and quick to react to any bad news on the supply front.”

Jess Ralston, head of the Energy and Climate Intelligence Unit, said bills in winter will be about 50% 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.

Previously, the payments of up to £300 had been available to everyone above state pension age.

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