Ofgem has announced its latest energy price cap increase of 4%, with energy bills set to rise by £60 a year from October. 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%.
How the cap affects your bill
However, that is for the typical household. You can use your current bills to estimate how much your bills will change by using our interactive calculator. 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.
VAT removal and gas price impact
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. This is also reflected in our interactive calculator.
Ofgem has said that the rise in price cap is due to the ongoing situation in the Middle East, with the conflict there impacting the wholesale price of gas. It means that households that 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.
What customers can do
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."
