Gas and electricity bills are set to increase by 10%, as announced by the regulator. Ofgem revealed that the price cap will escalate from £1,568 to £1,717 starting from October 1 for a typical household in England, Scotland, and Wales. Analysts had anticipated a 9% surge in energy bills for households when the new change takes effect in October. The price cap, determined by various factors such as wholesale energy prices, is reviewed every three months. Consequently, households might face higher bills heading into the colder months compared to the levels seen since April when the price cap was lowered.
Despite the upcoming rise, average bills are still significantly lower compared to the peak of the energy crisis, which was exacerbated by Russia’s invasion of Ukraine in February 2022, leading to soaring costs in an already turbulent energy market. Cornwall Insight also predicts another modest increase in January 2025, with further rises likely in the new year due to escalating tensions in the Russia-Ukraine conflict. The price cap functions as a maximum price that energy suppliers can charge consumers in England, Scotland, and Wales per kilowatt hour of energy used, without capping total bills as households are charged for their total energy consumption.
Craig Lowrey, principal consultant at Cornwall Insight, noted that the energy market remains volatile and reactive to any supply issues, despite recent falls in the price cap. Jess Ralston, head of the Energy and Climate Intelligence Unit, highlighted that winter bills are expected to be around 50% higher than pre-crisis levels on average due to the reliance on gas and limited progress in energy efficiency measures. Furthermore, the removal of winter fuel payments for some pensioners coinciding with bill hikes may lead to financial challenges for those affected. The Treasury disclosed that changes to winter fuel payments will reduce recipients from 11.4 million to 1.5 million, impacting around 10 million pensioners.
This shift in energy costs comes amidst ongoing challenges in the energy market and global uncertainty. Despite efforts to stabilise prices and support consumers, households are urged to consider energy-efficient practices and budgeting strategies to manage the upcoming bill increases.