Gas and electricity bills are set to increase by 10%, as announced by the regulator. Ofgem revealed that the price cap would rise from £1,568 to £1,717 from October 1 for a typical household in England, Scotland, and Wales. Experts had predicted a 9% rise in energy bills for households when the change takes effect in October. The price cap is determined by various factors, including wholesale energy prices paid by energy firms before supplying households and is updated every three months.
This increase means that households could face higher bills as they head into the colder months compared to the lower price cap in April of this year. Despite the rise, bills are still lower than during the peak of the energy crisis sparked by Russia’s invasion of Ukraine in February 2022. Cornwall Insight anticipates a further “modest” increase in January 2025, with more possible rises in the new year due to escalating tensions in the Russia-Ukraine conflict.
The price cap sets a maximum price that energy suppliers can charge consumers for each kilowatt hour of energy used. This cap does not limit a household’s total bills as people still pay for the total energy consumed. Jess Ralston from the Energy and Climate Intelligence Unit highlighted that winter bills are expected to be 50% higher than pre-crisis levels on average due to a continued reliance on gas and delayed progress in energy efficiency measures.
Meanwhile, the Government’s decision to halt winter fuel payments for pensioners not on pension credits or other means-tested benefits will impact around 10 million pensioners who previously received up to £300. These changes aim to reduce the number of pensioners receiving the payments from 11.4 million to 1.5 million. It remains to be seen if additional support measures will be introduced for those affected by the cessation of winter fuel payments.
The ongoing volatility in the energy market and international tensions are contributing to the price hikes in gas and electricity bills. As such, households are advised to brace for higher energy costs in the coming months, with the potential for further increases in early 2025. The situation underscores the importance of energy efficiency measures and exploring alternative energy sources to mitigate rising energy expenses for consumers.