Energy bills will go up by an average of around £35 a year in October, the industry regulator said today.
Ofgem set a new cap on gas and electricity prices for the last quarter of the year that will allow suppliers to increase the bills of the majority customers on standard tariffs by around 2%.
For an average household paying by Direct Debit for gas and electricity, the overall bill will be £1,755 per year.
This will cover the three months to December, the period when central heating is switched on again after the summer. Ofgem will set a new cap for the December to March period.
The new price cap will add around £2.93 a month to a typical household dual fuel bill for a family on a variable tariff. The minority of customers on a fixed deal will not be affected.
The increase in the cap is caused by the extension of the Government’s Warm Home Discount, which knocks £150 off the bills of vulnerable customers struggling to pay. This is funded by other customers and will add around £1.42 a month to the average household bill.
Another factor is an increase in electricity balancing costs - the system used by operators to ensure a stable electricity supply at all times - which adds around £1.23 to the average household bill.
This has gone up because of the increased use of windfarms and other generators of renewable energy which are less predictable and stable than conventional power stations.
Minister for Energy Michael Shanks said: “We know that any price rise is a concern for families. Wholesale gas prices remain 75% above their levels before Russia invaded Ukraine. That is the fossil fuel penalty being paid by families, businesses and our economy.
“That is why the only answer for Britain is this government’s mission to get us off the rollercoaster of fossil fuel prices and onto clean, homegrown power we control, to bring down bills for good.
“At the same time, we are determined to take urgent action to support vulnerable families this winter. That includes expanding the £150 Warm Home Discount to 2.7 million more households and stepping up our overhaul of the energy system to increase protections for customers.”
Tim Jarvis, Director General, Markets at Ofgem, said: “While there is still more to do, we are seeing signs of a healthier market. There are more people on fixed tariffs saving themselves money, switching is rising as options for consumers increase, and we’ve seen increases in customer satisfaction, alongside a reduction in complaints.
“While today’s change is below inflation, we know customers might not be feeling it in their pockets. There are things you can do though – consider a fixed tariff as this could save more than £200 against the new cap. Paying by direct debit or smart pay as you go could also save you money.”
Ofgem said when adjusted for inflation the cap is 0.9% lower than the same period in 2024.
Analysts Cornwall Insight also provided some hope for consumers forecasting that prices will fall back again by around £40 a year in January.
But Laura Hinton from MoneySuperMarket Energy said: “Today's price cap rise was even higher than expected and will likely feel like another blow to households across the country, especially the most financially stretched.
“Today’s announcement means that from October, the energy price cap is now around 50% higher than when it was first introduced in 2019, with the average UK household currently paying around 27% more for their energy than their European neighbours.
“However, it’s important for customers to remember this latest rise only applies to Price Capped energy tariffs from October, meaning customers who switch and fix now can protect themselves from price rises this coming winter.
“Currently, around 92% of customers are on a standard variable rate, putting them at risk to price increases this winter.”
