More than four million households still on a standard energy tariff are facing higher bills from Thursday, as Ofgem's price cap rises by 4%. The hike means the average household in England, Scotland and Wales paying by direct debit for gas and electricity will see their annual energy bill climb to £1,723 — an increase of £5 per month or £60 a year if sustained over 12 months.
The increase arrives just as dropping temperatures prompt millions to fire up their central heating. Ofgem has issued advice to help people "take back control". On social media, the regulator said: "Struggling with your energy bill? Act early to get help sooner. Take these 3 steps to take back control."
VAT cut and price cap changes
The October 1 rise to Ofgem's price cap also incorporates the Government's move to scrap VAT on household electricity bills, which comes into force from Thursday. The removal of the 5% levy until 31 March next year will save the average bill payer around £45 annually, according to Government estimates. Households will, however, continue to pay 5% VAT on gas.
Ofgem stated that the rise in its price cap reflected higher wholesale gas prices driven by the continuing conflict in the Middle East, with turbulent global markets remaining the primary force behind price fluctuations.
Advice for households
Comparison website Uswitch has urged households without smart meters to submit readings to their energy supplier before the end of the month, to avoid being charged at the higher rate for energy consumed prior to October 1. Households on a standard tariff with typical consumption are set to pay £145 on energy in October, up from £109 in September.
The jump of a third stems from a combination of greater usage owing to colder weather and elevated unit rates under the most recent price cap. The energy regulator will reveal its next price cap, covering January to March 2027, in November.
Forecasts for January
Experts have predicted a substantial rise, with major supplier EDF now forecasting a 30% surge to £2,098 – an increase of £375 on October's level. The predictions emerge amid the US-Iran conflict, which has pushed up energy costs globally. The blockage of the Strait of Hormuz – a crucial oil shipping route – has triggered fuel and electricity prices to soar at a pace not witnessed since Russia's invasion of Ukraine.
National Energy Action chief executive Adam Scorer said: "This latest price cap rise, just before winter, means there is simply no light at the end of the tunnel for vulnerable and low-income households. In fact, if forecasts for the January 2027 price cap are correct, then it's set to get a whole lot darker in the new year."
"The headline price cap figure is already bad, but it doesn't reflect the even worse reality for millions of fuel poor households. Our evidence shows vulnerable and low-income households already skipping food and heating even before this next price cap rise and temperatures start to drop. The Autumn Budget must deliver additional targeted support for households most at risk this winter, alongside action to tackle energy debt and improve the least energy efficient homes."
Ofgem reviews the price cap for households every quarter, primarily based on the cost of energy across wholesale markets. Introduced by the Government in January 2019, the energy price cap sets a ceiling on what energy suppliers can charge customers in England, Scotland and Wales for each kilowatt hour (kWh) of energy consumed. It does not place a limit on overall bills, however, as householders continue to pay for however much energy they actually use.
