Households are facing heightened winter pressure from energy bills after regulator Ofgem raised its price cap by 4% to a three-year high.
The regulator 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.
This increase reflected higher wholesale gas prices as a result of the ongoing conflict in the Middle East, with volatile global markets remaining the dominant driver of price changes.
Regulator's comments on the rise
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."
Impact on typical household bills
The latest price cap is based on Ofgem's updated definition of a typical consumer, which came into effect from July to reflect falling household energy use.
It would be the equivalent of £1,941 per year based on its previous calculations, up from £1,862 currently.
The increased October cap, which will remain in place for three months, will come into force as households start to increase their energy usage further by using their heating more regularly, adding to bills.
Further forecast increase
In a further blow for households, analysts Cornwall Insight released their latest forecast on Wednesday for a further 9% increase to the price cap in the New Year.
This would put an average January bill up to £1,872 a year, £149 higher than October's £1,723.
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."
Ned Hammond, Energy UK's deputy director for customers, said: "This latest increase is in line with the predictions and any such rise is always more worrying over the winter months when customers naturally use more energy.
"Coming off the back of a significant hike over summer, this further intensifies the challenges faced by customers struggling to afford their bills.
"As well as measures to improve targeted support, the Government needs to assess how to bring bills down over the longer term.
"The impact the conflict in the Middle East has had on gas prices underlines why we need to move to using more of our own sources of clean energy.
"But it's equally true that we need to look at a fairer way of funding the policy and system costs that are also driving bills higher."
