The average annual energy bill will increase to £1,849 from April as the industry regulator Ofgem increases the price cap for the third time in a row.
When compared to prices over the last three months, the new figure represents a 6.4% a year – or £9.25 per month – increase in the typical sum the vast majority of households face paying for gas and electricity when using direct debit.
It also means typical bills will be £159 more expensive than last year’s. It’s the first time the April cap has risen above the January cap since quarterly updates began in 2022.
Only those on fixed-rate deals – around eleven million homes – will see no change until their current term expires. An extra four million homes fixed the cost of energy units since November, Ofgem said.
The price cap limits the amount suppliers can charge per unit of energy and is revised every three months.
Energy debts have reached a record high, Ofgem also said.
Why are prices going up?
Ofgem’s energy price cap decision comes as a consequence of rising wholesale gas prices since the start of the year.
Europe has seen a price spike due to strong demand in recent months, driven by colder weather compared to recent years.
That, in turn, has sapped stockpiles and even prompted a warning last month from the owner of the UK’s largest gas storage facility that levels were “concerningly low”.
The UK is heavily reliant on gas for its home heating and also uses a significant amount for electricity generation.
It’s this reliance that has caused the increased cost, the regulator said. Only a small portion of the increase came from inflation and policy costs.
The government is investing heavily in more UK-based renewable energy, such as wind and solar farms, to ease the country’s current reliance on gas imports, targeting 95% clean power across the electricity grid by 2030.
When will prices fall?
Market analysts anticipate natural gas costs will remain elevated in the coming months due to Europe’s need to restock ahead of next winter.
But the prospect of a settlement between Russia and Ukraine has brought prices down slightly.
Bills are expected to fall in July.
Trusted forecasters Cornwell Insight see a slight fall to £1,756 as likely, but they caution that the forecasts will be changed to reflect market volatility in the coming months.
Widespread bill rises
Energy bills are just one of the cost increases consumers can expect in April.
Council tax and water bills are to rise then. Some people may be in a better position to meet those costs as the minimum and living wages will rise then.
For employers, their national insurance contributions also go up during the month.