Today sees Ofgem’s new price cap takes effect, raising energy bills for typical households by around £150 per year.
The average dual fuel household paying by direct debit will now face a yearly bill of £1,717, up from £1,568—a 10% increase, adding about £12 per month to the average bill.
The Ofgem price cap sets the maximum amount energy companies can charge per unit of gas and electricity, as well as the daily standing charge for being connected to the grid.
The cap is based on a “typical” household’s usage, which is currently 2,700 kilowatt hours of electricity and 11,500 kilowatt hours of gas annually.
Despite its name, the price cap doesn’t limit your total energy bill. It only caps the cost per unit of gas and electricity, so your bill depends on how much energy you use—using more will cost more.
Although prices are still lower than last winter, the rise in bills comes as some support for bills has been withdrawn, and the new government has announced it will stop winter fuel payments for around 10 million pensioners in England and Wales.
The new price cap is in place until December 31, with the next cap set to take effect on January 1, which Ofgem will announce on November 25.
The rise in the price cap prompted some households to look for fixed-rate energy deals before today’s deadline to avoid further increases.
Many households are already facing financial pressures due to inflation and rising costs of living with increased energy bills leading to tougher budgeting decisions and low income families potentially having to choose between heating and other essentials.
The new price cap will affect households on standard variable rate tariffs. If you’re on a fixed-rate energy deal, you won’t see an immediate rise, as your rates are locked in until your contract ends.
However, if your fixed deal expires between October and December, you’ll either need to switch to a new, likely higher, deal based on the current price cap or move to an SVR tariff. Your energy supplier will inform you of the new rates before they take effect.
