Energy bills are expected to see a slight increase this winter following the announcement of a new price cap by Ofgem. The typical annual household energy bill is projected to rise by 0.2% starting in January, contrary to earlier predictions of a decrease.
According to Ofgem, households with average energy usage paying through direct debit can anticipate an annual bill increase from £1,755 to £1,758. For those using pre-payment meters, the price cap will rise from £1,707 to £1,711 annually, and for individuals paying upon receipt of bills, the yearly charge will go up from £1,890 to £1,894.
Although the new price cap will be 2% or £37 lower compared to the previous year, energy bills remain significantly higher than before. The price cap governs the maximum amount that can be charged for gas and electricity unit rates and standing charges, but the total bill still depends on actual energy consumption.
The updated price cap will take effect on January 1 and remain valid until March 31, subject to further adjustments by Ofgem. The increase in the price cap is attributed to government policy costs and operational expenses, including contributions towards projects like Sizewell C nuclear plant and the Warm Home Discount scheme.
Ofgem highlighted that wholesale energy prices have been relatively stable, with a 4% decrease over the previous three months, albeit the market conditions are described as “volatile.” The price cap adjustments are aimed at shielding consumers from overpaying for energy, although customers are encouraged to explore different tariffs to potentially reduce their bills.
Minister for Energy Consumers, Martin McCluskey, emphasized ongoing efforts to address high energy costs, including initiatives like the Warm Home Discount scheme and investments in cleaner energy sources. The price cap, which sets limits on gas and electricity unit rates and standing charges, is revised every three months to align with changing wholesale energy prices.