Ofgem’s energy price cap to increase by 10 per cent from October
Households will pay £12 a month more for their gas and electricity bills starting in October after Ofgem announced it would lift its price cap.
The energy price cap for the final quarter of 2024 will rise 10 per cent to £1,717 for a typical household in the UK, the energy regulator confirmed today.
That means a typical household will pay £149 more per year for electricity and gas compared to the previous quarter. However, compared to the same period last year, the new cap is six per cent cheaper.
The regulator sets the price limit based on several factors including wholesale energy prices. Ofgem said that higher wholesale prices were the primary cause for the increase, accounting for 82 per cent of the rise.
Jonathan Brearley, CEO of Ofgem, said: “We know that this rise in the price cap is going to be extremely difficult for many households.”
Ed Miliband, the Secretary of State for Energy Security and Net Zero, said the increase was a result of the “failed energy policy” left behind by the Conservatives.
“The only solution to get bills down and greater energy independence is the government’s mission for clean, homegrown power,” he said.
The cap, which sets a maximum rate per unit and standing charge that can be billed to customers for their energy use, is updated every three months. Ofgem has already lowered the price cap twice this year in response to falling energy prices, easing the burden on consumers.
However, Gillian Cooper, director of energy at Citizens Advice said, today’s hike would mean more and more people fall behind on their energy bills.
“Our research shows people are so worried about price increases that one in four say they could be forced to turn off their heating and hot water this winter,” she said.
“Energy bills will now be around two thirds higher than before the crisis, and with record levels of energy debt and the removal of previous support, people are in desperate need.”
The increase in the price cap comes shortly after Chancellor Rachel Reeves introduced means testing on winter fuel payments for pensioners in a bid to plug a £22bn blackhole in the public finances.
The move will see the number of households eligible to receive the winter fuel payments falling from 8.4m households to 1.5m households.
Looking forward, consultancy firm Cornwall Insight expect there to be a further “modest” increase in January 2025 due to escalating tensions in the Russia-Ukraine war.
Greg Jackson, founder of Octopus Energy said: “The way to bring bills down is to build more cheap British wind and solar power, and to mend the market so that costs are set locally – not by global gas prices.”
Simon Virley, vice chair and head of energy and natural resources at KPMG UK, urged the government to press on with reform of the energy market to help ease the burden on consumers.
“The price cap has effectively become the default tariff over the past 18 months, which limits the incentives for investment and innovation. So, it is important that reform of the retail market remains a priority for the Government and the regulator if we want to reap the benefits of a smarter, greener energy system,” he said.
According to Rightmove, changes to the price cap will have very different impacts depending on the energy-efficiency of the homes.
For a home with the highest rated A Energy Performance Certificate, average annual bills could rise by £56 whereas bills could rise by an average of £558 for G rated homes.