Millions of households are facing another increase in their energy bills starting today, with experts cautioning that costs will remain elevated throughout the winter season.
The Ofgem price cap is set to rise by approximately 13%, triggered by a surge in wholesale costs following the conflict in the Middle East. For the average household using direct debit payment, the price cap will climb from £1,641 to £1,862 annually.
Despite its name, the price cap does not restrict the total amount paid for gas and electricity usage. Instead, it places a limit on unit rates and standing charges, meaning that the energy bill is predominantly influenced by individual consumption levels.
Ofgem has adjusted its calculation method to reflect reduced energy usage, projecting a lower price cap of £1,477 for April compared to the new July price cap of £1,663 per year.
Households on a variable energy tariff are protected by the price cap unless they are under a fixed deal. Uswitch advises exploring fixed tariffs that may offer better rates than the price cap, emphasizing the importance of comparing options to potentially save money.
Dr. Craig Lowrey from Cornwall Insight highlighted that despite a temporary market relief due to the Iran ceasefire, energy prices are still under pressure. The long-term impact of the conflict on infrastructure and supply chains is expected to persist, contributing to higher energy bills as winter approaches.
The price cap will be effective until October, with Cornwall Insight forecasting an average household bill of £1,849 by then. Ofgem is scheduled to announce the price cap for October by August 26, with expectations indicating a marginal decrease.