The average energy bill for households in Great Britain is set to increase by £111 to £1,849 annually from April, marking the third consecutive rise in the energy price cap, as announced by the energy regulator.
This 6.4% increase primarily reflects a surge in wholesale prices and has exceeded the expectations of forecasters.
Previously, in January, Ofgem had adjusted the cap upwards by 1.2% to £1,738 annually for direct debit customers following a spike in market prices due to freezing conditions across Europe which depleted gas reserves.
The upcoming price adjustment means that households will now pay approximately £600 more annually for their gas and electricity compared to the period before the geopolitical upheaval triggered by Russia‘s invasion of Ukraine three years ago.
Around 9 million homes on variable tariffs will immediately feel the impact of the new cap in April. However, those on fixed tariffs will experience a delayed effect.
The cap, recalculated quarterly, does not limit the total bill but caps the rate charged per unit of gas and electricity, suggesting households could face even higher costs if their energy usage exceeds typical levels.
From April, electricity will cost 27p per kilowatt-hour, up from 25p, with the standing charge reduced to 54p from 61p. Gas prices will rise from 6.34p to 6.99p per kilowatt-hour, with the standing charge increasing slightly from 31.65p to 32.67p.
Energy consultancy Cornwall Insight had initially predicted the April cap to be set at £1,785, but recent hikes in energy market prices have pushed this estimate up. Just last week, the consultancy foresaw an increase of £85 or 5% to £1,823.
Ofgem’s latest cap affects approximately 22 million customers on standard variable tariffs. Another 11 million on fixed deals will not see changes due to this adjustment, according to the regulator.
Ofgem Chief Executive Jonathan Brearley acknowledged the unwelcome nature of price rises and the ongoing challenges posed by volatile international gas markets, emphasizing the need for investment in a sustainable and domestically-focused energy system.
The unexpected increase in the price cap represents a setback to government commitments to reduce energy bills by up to £300 by 2030.
In response, the government has announced consultations on expanding the warm home discount scheme, which currently offers eligible households £150 off their winter energy bills.
The proposed expansion would include an additional 2.7 million households, raising the total beneficiaries next winter to 6.1 million across Britain.
Energy Secretary Ed Miliband reaffirmed the government’s commitment to mitigating the effects of fluctuating fossil fuel markets on consumers.
Although the price cap is expected to decrease slightly in the summer, it is likely to climb again in October due to increased energy consumption in colder weather.
Peter Smith of the National Energy Action charity and Dame Clare Moriarty of Citizens Advice expressed significant concerns about the impact of rising energy costs on vulnerable groups, particularly families with children and low-income households.
Craig Lowrey of Cornwall Insight highlighted the limitations of government energy policy in the face of global price increases, while Jonathan Brearley hinted at forthcoming plans to address unsustainable energy debts, potentially lowering costs by £25-£30 annually.
