Ofgem’s energy price cap rises to £1,738 a year and energy bills to be ‘50% higher than pre-crisis levels’

On November 22, 2024By Littum

Ofgem has confirmed that the energy price cap will rise again in the new year in a devastating cost of living blow for consumers.

The typical energy bill for households on a variable rate will rise to £1,738 a year between January and March 2025.

This represents an increase of £21 or 1.2 per cent from the cap currently set by the UK energy regulator. As such, households will pay £1.25 more per month. Earlier this year, Ofgem’s energy price cap fell to £1,568 earlier this year, in a welcome sign for households struggling to keep up with the cost of living crisis.

However, the cap rose by 10 per cent on 1 October to the current level of £1,717 a year, and this trend looks set to continue for the foreseeable future.

Despite this latest increase to Ofgem’s cap, it remains 10 per cent, or £190 cheaper, compared to January to March 2024, and 57.2 per cent more than the £2,321 posted for January to March 2023.

Over the past few years, households have been forced to contend with skyrocketing energy prices as a result of wholesale pressure on the gas and electricity markets and the fallout from Russia’s illegal invasion of Ukraine.

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Ofgem’s price cap rise means people will pay towards their energy bills

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Tim Jarvis, director general of markets at Ofgem, said: “While today’s change means the cap has remained relatively stable, we understand that energy costs remain a challenge for far too many households.

“However, with more tariffs coming to market, there are ways for customers to reduce their bill, so feel free to look around and look at all the options. Our dependence on volatile international markets – which are affected by factors such as events in Russia and the Middle East – means that the cost of energy will continue to fluctuate.

“So it’s more important than ever to stay focused on building a renewable, home-grown energy system to bring down costs and provide stability for households.”

Campaigners are calling on the government to do more to tackle fuel poverty as families continue to face energy bills “50 per cent higher than pre-crisis levels”. Fuel poverty is the term used to describe when people are unable to heat their homes adequately without spending a greater proportion of their disposable income.

These calls for action come after the chancellor’s decision to means-test Winter Fuel Payments, a previously universal benefit for pensioners. Now older Britons must have Pension Credit and other benefits to access up to £300 in energy bill support.

Adam Scorer, National Energy Action’s chief executive, breaks down what’s at stake for Britons following today’s latest announcement from Ofgem.

He explained: “Today’s news that the price cap is rising by 1% will affect millions of vulnerable households. Bills are around 50 per cent higher than pre-crisis levels. With temperatures now plunging and far less support available, many are falling deeper into debt by trying to keep warm.

“Now we know there will be no nonsense into January and beyond. Targeted government support is essential to save millions from the misery and danger of a cold home.

Simon Francis, the co-ordinator of the End Fuel Poverty Coalition, added: “As temperatures plummet, a fourth winter of the energy bill crisis is big on people’s minds.

“The decision to introduce a mid-winter price cap change was made by Ofgem in 2022 and was described as an inhumane policy at the time. No wonder it has been opposed by campaigners ever since, as households will have to find more money to stay warm at the worst possible time.

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“Already the average household will have paid around £2,500 more for their energy than if we hadn’t been so exposed to volatile energy markets. To make matters worse, the new government has cut support levels for some of the most vulnerable households.”

Following its latest price cap update, Ofgem is urging consumers to reflect on the way they pay their energy bills. Around five million customers pay with standard credit payments, which means that every street and electricity used is paid for afterwards.

However, the regulator is warning that this is a more expensive way of paying energy bills in the winter months as they are cheaper alternatives for customers to consider.

According to Ofgem, families will save £100 by switching from standard credit payments to direct debits or prepayment smart meters.