Ofgem, Britain’s energy regulator, said in a statement on Thursday that the energy bills are to rise as the regulator raises the price cap by 5%.
The price cap, adjusted every quarter, establishes the maximum amount that can be charged to customers for energy bills.
For an average household using dual fuel and paying through direct debit, this means a yearly increase of £94, which is approximately £7.83 per month.
All together, given the new price cap, this adds up to £1,928.
Jonathan Brearley, CEO of Ofgem, said that “this is a difficult time for many people, and any increase in bills will be worrying. But this rise—around the levels we saw in August—is a result of the wholesale cost of gas and electricity rising, which needs to be reflected in the price that we all pay.
The current price hike was attributed to the wars in Ukraine and the Middle East, amongst other geopolitical challenges.
Nonetheless, the UK is still grappling with a degree of inflation and a cost of living crisis.
Although the inflation rate fell by 4.6% in October, some analysts attribute it to lower energy use due to a slightly warmer summer and autumn.
On Wednesday, Jeremy Hunt of the Conservatives announced 0.7% tax cuts, which will be worth £18bn of GDP.
Many were pleased with this and many other announcements. However, according to Susannah Streeter, Head of Money and Markets at Hargreaves Lansdown,
“News that energy bills are set to rise for millions of households in January will come as a blow after the sweeteners offered by the UK government in terms of those cuts to NI tax”.
Similarly, Danni Hewson from AJ Bell said, “It’s a timely reminder that inflation might be falling, but some prices are still rising”.
The CEO, Jonathan Brearley, also said that “we are also seeing the return of choice to the market, which is a positive sign, and customers could benefit from shopping around with a range of tariffs now available offering the security of a fixed rate or a more flexible deal that tracks below the price cap”.
He advised the people to “weigh up all the information, seek independent advice from trusted sources, and consider what is most important for them, whether that’s the lowest price or the security of a fixed deal.”
Ofgem has issued updated guidelines for energy providers, emphasising the importance of giving priority to inquiries from vulnerable customers seeking assistance.
Suppliers are urged to proactively engage with households missing two monthly or one quarterly payment, assessing their financial challenges, and providing support such as affordable payment plans or potential repayment holidays if deemed suitable.