The next Ofgem energy price cap has been announced – and it is double what households had braced for.
Millions of people will see their energy bills go up by 2% within weeks after the regulator’s confirmation today.
Households had initially expected their energy bills to rise by 1% based on forecasts.
But the higher cap will allow energy companies to charge slightly more from October.
The energy price cap, which is set by Ofgem, limits how much the companies can charge consumers.
When does the latest energy cap start?
The new energy prices will start from October 1 for typical households in England, Scotland and Wales.
How much will bills rise?
The 2% increase means an average household will have to dish out around £2.93 more each month.
A home using the default tariff will pay £102 a month instead of £100.
However, those using a fixed tariff are protected from the upcoming rise.
Around 37% of energy customers have switched to a fixed tariff.
Martin Lewis said yesterday ahead of the announcement: ‘If you’re not on a fix, consider it asap.’
What should I do before the energy price rise?
Those not on a fixed tariff should submit their latest electricity meter readings to their provider, like Octopus or British Gas, before October.
Tim Jarvis, director general of 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.
What is the energy price cap?
The energy price cap sets the maximum limit suppliers can charge people for their energy use.
The latest cap is now set between October 1 and December 31 at £1,755 per year for a household who uses electricity and gas and pay by Direct Debit.
In comparison, the previous cap between July 1 and September 30 was £1,720.
Your bills will be affected by the rise if you pay for electricity and gas by standard credit, Direct Debit, a prepayment meter or an Economy 7 (E7) meter.
‘Paying by direct debit or smart pay-as-you-go could also save you money.
‘In the longer term, we will continue to see fluctuations in our energy prices until we are insulated from volatile international gas markets.
‘That’s why we continue to work with Government and the sector to diversify our energy mix to reduce the reliance on markets we do not control.’
Cabinet Office minister Nick Thomas-Symonds vowed that the government is looking to reduce bills by £300 over the next five years.
He told BBC Breakfast today: ‘Reducing bills by £300 that is something we stand by, we will be looking to achieve that by 2030.
‘That means taking decisions now, the long term decisions that are going to make the difference.
‘The energy price cap remains at the level it is essentially because we still have the wholesale price of gas 75% higher today than it was before Putin’s illegal invasion of Ukraine.’
Campaigners warned that the households already in poverty will be the hardest hit.
Simon Francis, a coordinator of the End Fuel Poverty Coalition, said: ‘Among the hardest hit by the planned price cap rise will be the 12 million households already in fuel poverty.
‘It means that average energy bills will remain painfully high and hundreds of pounds a year more than in winter 2020/21.
‘Hidden in the detail of the announcement is a 14% increase in gas standing charges while gas unit rates remain almost double pre-crisis levels. And the cost of electricity is also up, which is itself set by the cost of the most expensive generator, usually gas-fired power stations.’
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