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Today, Energy Regulator Ofgem has announced that from 1st October, the energy price cap will rise to £1,717, which represents a 10% increase from the current price cap of £1,568. Energy consultancy, Cornwall Insight, has also forecasted another increase in January owing to ‘recent tensions in the Russia-Ukraine war’.
Under the new price cap, a typical household’s annual energy bill will rise by £149 in October. As we head into the Autumn and Winter months, this is worrying news for the 28 million households in England, Wales and Scotland. So, what does the future hold for UK energy bills and what can we do to mitigate the impact of rising prices?
Ofgem illustrates the price cap in terms of an annual energy bill for a typical household using a typical amount of gas and electricity. This means if you live in a larger household you will likely pay more, and if you live in a smaller household you will likely pay less as this will be reflected in your energy usage.
The price cap sets a limit on the maximum amount you can be charged per unit of gas and electricity used (measured in pence per kilowatt hour) and it changes every three months. It is not a fixed rate, but rather provides an idea of how much an average household can expect to pay if energy usage is typical. Bills will vary based on location, energy usage, how you pay your bill and the type of meter you have.
The current energy price cap sits at £1,568 (July-September 2024). Although this is the lowest energy bills have been for 2 years, they are still about £400 higher than they were three years ago. Since the Russian invasion of Ukraine triggered the energy crisis, its lingering impact has left the energy market highly volatile.
Craig Lowrey, a principal consultant for Cornwall Insight responded to the recent news of rising energy bills:
“Following two consecutive falls in the cap, I’m sure many hoped we were on a steady path back to pre-crisis prices. However, the lingering impact of the energy crisis has left us with a market that’s still highly volatile and quick to react to any bad news on the supply front.”
“Despite this, while we don’t expect a return to the extreme prices of recent years, it’s unlikely that bills will return to what was once considered normal. Without significant intervention, this may well be the new normal.”
The news of rising energy prices comes soon after Chancellor Rachel Reeves announced cuts in winter fuel payments for pensioners. This allowance, worth between £100 and £300, will now only go to pensioners who get pension credit or other means-tested benefits. In Winter 2022-23, more than 11.3 million pensioners received the payment, whereas this Winter, the cuts are set to leave hundreds of thousands of pensioners facing higher energy bills throughout the coldest time of year.
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