Millions of British households will see their energy bills edge upwards in the New Year, as the regulator Ofgem confirms a slight but significant increase to its price cap. The change dashes earlier hopes of a winter reduction and places further strain on budgets already stretched by the long-running energy costs crisis.
What the New Price Cap Means for Your Bills
The new cap, which comes into force on January 1, 2025, will see the average annual bill for a typical dual-fuel household paying by direct debit rise from £1,755 to £1,758. This represents a 0.2 per cent increase, adding roughly 28 pence per month to the average cost.
This adjustment will directly impact an estimated 34 million UK households who are currently on a variable or default tariff, meaning they are not locked into a fixed-rate deal. The price cap sets a maximum limit on the unit rate and daily standing charge that suppliers can apply for these customers.
The detailed figures show a mixed picture for the coming quarter. While the unit rate for electricity will rise from 26.35p to 27.69p per kWh, the gas unit rate will actually fall slightly from 6.29p to 5.93p. However, daily standing charges for both fuels are set to increase, a point heavily criticised by consumer groups.
Record Debt and Political Reactions
The announcement has been met with concern from money-saving experts and campaigners, who highlight that bills remain vastly higher than pre-crisis levels. Greg Marsh, CEO of Nous.co, stated, 'The price cap is rising by a very small amount – but bills are still far higher than they were before the energy crisis. As a result, energy debt is at record levels, with households typically owing more than £1,000.'
Simon Francis of the End Fuel Poverty Coalition echoed this, noting the announcement 'keeps average energy bills at almost £700 above the levels of winter 2020/21'. He also criticised the rise in standing charges and the addition of a new levy to fund future nuclear power projects.
The political response was swift. Technology Secretary Liz Kendall pointed to immediate government action, including the expanded Warm Home Discount Scheme offering £150 off bills for six million households on Universal Credit. She emphasised a long-term strategy to 'get off those fossil fuels' and develop cheaper home-grown renewable and nuclear energy.
In contrast, Shadow Energy Secretary Claire Coutinho attacked the government's plans, claiming independent experts warn that net zero targets 'will lock us into paying higher bills for decades' and that green levies could soar by another £260 by 2030.
How to Reduce Your Energy Costs
Ofgem and consumer advocates urge households to take proactive steps. The regulator noted that 8 million customer accounts pay by standard credit and could save around £136 per year simply by switching to direct debit.
Richard Neudegg of Uswitch.com called the high cap 'a stark reminder of the need for households to take matters into their own hands.' He advised consumers to shop around, as the cap only protects those on variable tariffs and many could find cheaper fixed deals elsewhere.
Ofgem also reiterated that rules are in place to ensure suppliers help customers struggling with payments, offering options like tailored repayment plans and access to debt advice. Energy Consumers Minister Martin McCluskey affirmed the government's 'clean power mission' as the route to long-term bill reduction.
Despite wholesale energy prices falling by 4% over the last three months, Ofgem warned that market conditions remain 'volatile', offering little certainty for future cap periods. For now, the cold snap sweeping the nation coincides with a fresh reminder of the enduring financial burden of keeping homes warm.
