Millions of households are set to experience a substantial increase in their energy bills this summer, with experts now cautioning about another surge in prices coming this winter.
The price cap is scheduled to rise by 13% to £1,862 annually for the average dual fuel household paying by direct debit starting in July. This translates to an additional £221 per year, or £18 per month, based on the current price cap of £1,641.
Consumers can expect a more moderate increase of about 5% on their electricity bills compared to a significant 24% rise in gas bills. The energy cap encompasses numerous households across England, Wales, and Scotland.
The escalation in prices was largely anticipated due to the conflict in Iran, leading to a spike in global energy prices following the closure of the Strait of Hormuz. This strategic waterway typically facilitates the passage of approximately a fifth of the world’s oil and liquefied natural gas.
Analysts are already foreseeing another price cap increase later this year as temperatures drop and energy consumption rises. Cornwall Insight projects a 2% rise in the October price cap to £1,899 annually, with Ofgem updating the price cap every quarter.
Dr. Craig Lowrey, Principal Consultant at Cornwall Insight, expressed concerns about the impending rise in October coinciding with the onset of the winter heating season. He highlighted the potential prolonged impact on energy bills even if the Middle East conflict were to resolve swiftly.
Richard Neudegg, director of regulation at Uswitch.com, advised households to explore fixed energy deals to mitigate the impact of price hikes. By securing a fixed deal now, consumers can shield themselves from future increases.
Tim Jarvis, Ofgem CEO, attributed the current price change to ongoing volatility in global energy markets driven by elevated wholesale gas prices resulting from the Middle East conflict.
Energy Secretary Ed Miliband acknowledged the burden on households due to the price cap rise and emphasized the government’s efforts to alleviate the financial strain through various measures, including freezing fuel duty and extending support programs.
The Ofgem price cap, despite its name, does not restrict the total energy cost but rather sets the maximum unit rates and standing charges. It considers average energy usage, which has decreased recently, leading to adjustments in the price cap figures.
Factors like location, payment method, and energy usage impact individual bills, with varying rates for different regions and customer types. The price cap figures are subject to regular updates to reflect changing wholesale costs.
The Ofgem price cap applies to customers on standard variable rate tariffs, encompassing a significant number of accounts across the UK. Wholesale energy costs, infrastructure maintenance, operational expenses, and other factors contribute to setting the price cap.
Ofgem is expected to announce the October price cap by August 26, 2026, as part of its routine updates.
