Energy price cap to increase to £1,717 in October, confirms regulator
The energy price cap will rise to an average annual £1,717 from October, the industry regulator Ofgem has confirmed. This represents a 10% increase from the current level and will result in an additional £12 per month for households using direct debit to pay for their gas and electricity.
According to Ofgem, the rise is mainly due to higher wholesale gas prices. The regulator has urged bill-payers to “shop around” for fixed rate deals that could offer savings. However, this news comes as the clock ticks down to the loss of winter fuel payments for millions of pensioners.
The decision means that the price cap, which is adjusted every three months to limit what suppliers can charge per unit of energy, will remain around £500 higher than the average annual bill levels seen before Russia’s invasion of Ukraine. It is also set to be £117 lower than the October 2023 level.
Chancellor Rachel Reeves has recently announced the end of winter fuel payments for around 10 million pensioners who are not in receipt of means-tested benefits, including pension credit. This decision has been met with widespread backlash, including from within Labour’s own ranks.
In response to the rising energy prices, Dr Miatta Fahnbulleh MP, an energy minister, will be holding a roundtable meeting with energy suppliers next week to discuss ways of protecting vulnerable customers this winter.
Charities have warned that heating costs remain unaffordable for many and are a significant factor in the continuing cost of living crisis. Research by Citizens Advice shows that one in four households may be forced to turn off their heating and hot water due to record levels of energy debt.
Energy Secretary Ed Miliband has acknowledged the rise in the price cap as “deeply worrying” but has defended the decision to end winter fuel payments. He stated, “The truth is that the mess left in the public finances has necessitated this decision, and we are focusing on providing support to those who need it the most.”
Miliband also mentioned the government’s efforts to help pensioners who are entitled to pension credit but not receiving it, in order for them to receive the winter fuel payment.
An updated forecast by the energy research consultancy Cornwall Insight predicts a further 3% increase in the price cap during the peak use months of January-March, bringing it to £1,762.
Ofgem’s chief executive Jonathan Brearley acknowledged that the price rise will be difficult for many households. He encouraged those struggling to pay their bills to make sure they are receiving all the benefits they are entitled to and to contact their energy company for further help and support.
Brearley also emphasized the importance of shopping around and considering fixed rate tariffs that could potentially save money and provide security with a fixed rate for a set period.
He mentioned that Ofgem is working with the government, energy suppliers, charities, and consumer groups to support customers, including reforming standing charges and tackling debt and affordability.
However, Brearley also acknowledged that there are no quick fixes and any changes could potentially leave low-income households worse off. He stated that the price rise is primarily driven by the volatile global gas market, which is easily influenced by unforeseen international events and aggressive states.
The government’s energy strategy includes measures to reduce the country’s dependence on natural gas for heating and electricity through a greater commitment to wind power, including onshore. The aim is to lower bills in the future.
Jess Ralston, head of energy at the Energy and Climate Intelligence Unit, emphasized the need for progress on energy efficiency and heat pumps to reduce the country’s reliance on gas. She stated that without a decrease in demand for gas, the UK will continue to rely on foreign imports, which do not benefit bills or energy independence.
Ralston also mentioned the removal of winter fuel payments for some pensioners at the same time as rising energy bills and questioned whether the government will introduce measures to support those most affected by the change.
