Energy costs for millions of households will rise to their highest level for three years, it was confirmed today. Ofgem said the price cap will rise by £60 per year – or £5 per month – to £1,723 for the average household using both electricity and gas if this level was sustained for a year.
VAT removal limited the rise
Neil Kenward, Ofgem’s director general for markets, said prices would have risen higher without a plan to remove VAT from electricity bills. He said: "High international gas prices are continuing to drive energy costs in the UK. We welcome the Government’s intervention to remove VAT from electricity bills, without which customers would have faced even higher costs this winter."
Kenward added: "Savings are available by choosing a fixed tariff, which are available at £100 or more below the October price cap, and many suppliers offer tariffs with cheaper electricity to smart meter customers for electricity consumed out of peak times. It’s also worth considering different payment methods, with prepayment customers paying the lowest price cap rates, and could save consumers an average of about £45 compared to direct debit."
Government defends support measures
Making the announcement, Energy Secretary Miatta Fahnbulleh said: "Families will be understandably concerned about the cost of energy bills this winter, which is being driven up by the Iran War. Energy is an everyday essential and it needs to be affordable for everyone, which is why we have cut VAT on electricity bills from October, to give families some breathing space. This has limited the rise in the price cap and follows the £150 in costs we removed from bills earlier this year, and we will keep looking at what more we can do to protect families from unaffordable bills."
The Government said it "will keep looking at what more we can do to protect families from unaffordable bills". It also said it had expanded the £150 Warm Home Discount to around six million households and extended the scheme for the rest of the decade. It described the Warm Homes Plan as the "biggest home upgrade plan in British history", saying it will reduce energy use, lower bills for millions of households and help "lift households out of fuel poverty".
