𝓤𝓷𝓲𝓽𝓮𝓭 𝓝𝓮𝔀𝓼

The energy price cap will rise by 2% from October 1 for a typical household in England, Scotland and Wales, despite falling wholesale prices, Ofgem has said.

The regulator said wholesale prices were currently “stable” and had fallen by 2% over the past three months as it announced that the energy bill for the average household paying by direct debit for gas and electricity would rise from the current £1,720 to £1,755 per year.

However, standing charges – the figure consumers pay per day to have energy supplied to their homes – are set to rise by 4% for electricity and 14% for gas, or 7p a day, primarily driven by the Government’s expansion of the Warm Home Discount.

Around 2.7 million more low-income households, including 900,000 families with children, are eligible for the £150 Warm Home Discount this winter, after the Government confirmed it would remove the “hard to heat” eligibility criteria.

The Government has said that the change will see an estimated 6.1 million households receive the discount this winter.

Ofgem said the latest increase was also driven by an increase in electricity balancing costs – incurred by network operators to ensure a stable electricity supply for when there is both too much power and too little power in the system – adding around £1.23 a month to the average household bill.

Ofgem also warned that unpredictable global events meant prices remained volatile and were likely to change, although analysts Cornwall Insight have forecast a “small” decrease to the price cap from January.

Ned Hammond, deputy director of customer policy at Energy UK, which represents the industry, said: “While it is usually movements in wholesale energy costs that affect the price cap’s level, on this occasion one of the factors behind the rise is the expansion of the Warm Home Discount to an extra 2.7 million households.

“At a time when customer debt is at a record £4 billion plus and many are still struggling with bills hundreds of pounds higher than at the start of 2022, the extra support this will provide is much needed.

“However, the Government does need to look at a fairer way of targeting support.

Gillian Cooper, director of energy at Citizens Advice, said: “Today’s announcement means the price cap will remain drastically higher than before the energy crisis. With millions of households already in debt as the colder months draw in, this news offers no comfort.

“The Government has made welcome changes to expand the number of people who’ll receive support with their energy bills this winter, but it’s not enough to turn the tide. Our advisers are bracing for more calls as people struggle to top up their meters and pay the gas bill.

“It’s high time for decisions about the longer term. The Government must set out plans for how it will support the households struggling the most over the coming years and also prioritise investing in energy upgrades for millions of homes, to reduce costs and keep money in people’s pockets.”

The End Fuel Poverty Coalition said the latest increase represented a 2.21% year-on-year rise and meant energy bills would be 68% or £713 a year higher than in the winter of 2020-21.

Simon Francis, coordinator of the End Fuel Poverty Coalition, said: “Among the hardest hit by the planned price cap rise will be the 12 million households already in fuel poverty.

“Hidden in the detail of the announcement is a 14% increase in gas standing charges while gas unit rates remain almost double pre-crisis levels. And the cost of electricity is also up, which is itself set by the cost of the most expensive generator, usually gas-fired power stations.

“Given that wind and solar are far cheaper ways of generating power and North Sea gas reserves are unable to meet domestic heating needs from 2027, it’s time for action.”

Energy minister Michael Shanks said: “We know that any price rise is a concern for families.

“Wholesale gas prices remain 75% above their levels before Russia invaded Ukraine. That is the fossil fuel penalty being paid by families, businesses and our economy.

“That is why the only answer for Britain is this Government’s mission to get us off the rollercoaster of fossil fuel prices and onto clean, homegrown power we control, to bring down bills for good.

“At the same time, we are determined to take urgent action to support vulnerable families this winter. That includes expanding the £150 warm home discount to 2.7 million more households and stepping up our overhaul of the energy system to increase protections for customers.”

Ofgem changes the price cap for households every three months, largely based on the cost of energy on wholesale markets.

The energy price cap was introduced by the Government in January 2019 and sets a maximum price that energy suppliers can charge consumers in England, Scotland and Wales for each kilowatt hour (kWh) of energy they use.

It does not limit total bills because householders still pay for the amount of energy they consume.