Energy bills are set to increase by £60 a year from October as Ofgem increases the energy price cap by 4%. That works out as an extra £5 a month for the typical household.
The energy price cap will be increasing to £1,723 a year for the typical household for people who aren’t on a fixed tariff and pay by Direct Debit in England, Scotland and Wales. It’s up from the £1,663 cap currently in place, an increase of 4%.
Who is affected by the price cap rise
The price cap sets the maximum you can be charged for unit rates and standing charges - so your bill can be higher or lower than the price cap figure. An estimated 35% of all households, around 11 million in total, are on fixed tariffs and will not be affected by this rise.
It’s also believed that the removal of VAT on electricity bills will also save households £45 a year. The VAT of 5% will no longer apply to electricity bills under action undertaken by Andy Burnham when he became Prime Minister.
Reason for the increase
Ofgem has attributed the rise in price cap to the ongoing situation in the Middle East. The conflict there is impacting the wholesale price of gas. This means that households who use less gas than others will be less impacted by the changes. In fact, households that don’t use gas at all are estimated to see an increase of less than 1% in their bills.
Neil Kenward, Ofgem’s Director General for Markets, 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.
“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.”
