A 4% increase to Ofgem's energy price cap took effect on Thursday, with experts warning household bills could rise by almost another £300 from January.
The rise means the average household in England, Scotland and Wales paying by direct debit for gas and electricity now faces an annual bill of £1,723 — up £5 a month or £60 a year if sustained over 12 months. More than four million homes on a standard energy tariff are affected.
January rise predicted
Cornwall Insight predicts the cap will rise by a further 16% to £1,999 a year on January 1, up £276 on the October-to-December level and the biggest increase since January 2023.
The consultancy said the predicted increase is driven by the escalating conflict in the Middle East, which has disrupted gas supplies to the UK and worldwide as the vital Strait of Hormuz shipping route has been effectively closed since the Iran war began in February.
Government response
In an effort to help households, the Government has temporarily removed the 5% VAT from electricity bills until March 31 next year, cutting around £45 a year. Households will still pay 5% VAT for gas.
Prime Minister Andy Burnham said: "For many families, the energy bill is the one they dread the most. I don’t accept that it has to be this way, and I am determined to bring down costs for good."
He added: "But I know people can’t wait. Families need breathing space now. That’s why, from today, VAT is gone from your electricity bill. And we’re going further, capping bus fares at £2 from January and cutting business rates for pubs, social clubs and live music venues."
Campaigners urge support
The End Fuel Poverty Coalition urged ministers to prepare an "emergency heat tariff" to cap the cost of heating this winter, with gas prices already rising 27% year on year.
Simon Francis, co-ordinator of the coalition, said: "With the number of households in fuel poverty set to soar again and at the most dangerous time of the year, the Chancellor has no choice but to act to provide increased targeted support to vulnerable households and plan to deliver wider universal help for people facing a sixth winter of high energy prices."
He added: "If ministers do nothing, millions will spend this winter in cold, damp homes, unable to cook a hot meal. People will get ill. Some will die. Every one of those avoidable cases will be on this Chancellor’s watch."
Energy UK's deputy director of customer policy Ned Hammond said: "With wholesale gas prices at a three-year high and energy debt predicted to reach £7 billion by the end of 2026, it is clear that urgent action needs to be taken."
He advised: "We advise anyone struggling with bills to contact their supplier. There is a range of help available and it’s important suppliers understand your circumstances so they can offer support tailored to your needs."
