Households will begin the run-up to winter with a 9.5% increase in their energy bills after the industry regulator increased its cap on energy prices from October.
Under the new price cap, the average annual energy bill will rise to £1,717 a year for gas and electricity, up £149 from its current level of £1,568, which has been in place since July.
The price cap is set every quarter by Ofgem, the energy regulator for Great Britain, and imposes a maximum on how much suppliers can charge their 29 million household customers per unit of gas and electricity.
The increase – equivalent to about £12 a month – is expressed in terms of how much the average home would pay at this rate for their typical annual energy use, which means a cold autumn and winter could push bills even higher if households need to keep the heating on for longer.
This is broadly in line with the costs of energy last autumn and winter, when the cap rose to £1,834 between October and December and £1,928 from January to March. However, bills will remain well above the cap set before Russia’s war on Ukraine triggered a global energy market shock when the winter price was £1,216.
Campaigners fear that the increase will take an even greater toll on households this winter after years of high bills that have left customers with record energy debts of more than £3bn.
Ofgem said rising prices in the international energy market, due to heightened political tensions and extreme weather events, were the main drivers behind the decision.
Jonathan Brearley, the regulator’s chief executive, said: “We know that this rise in the price cap is going to be extremely difficult for many households.
“Anyone who is struggling to pay their bill should make sure they have access to all the benefits they are entitled to, particularly pension credit, and contact their energy company for further help and support.”
He also urged consumers to “shop around” and consider opting for a fixed-rate tariff that could save people money.
The regulator revealed the price cap weeks after the chancellor, Rachel Reeves, set out plans to restrict the winter fuel allowance. Reeves said it would no longer be universal and only pensioners on means-tested benefits would qualify this winter.
The allowance, which is worth between £100 and £300, was paid to 11.4 million pensioners in 8.4 million households in the winter of 2022 to 2023. The changes are expected to leave hundreds of thousands of pensioners facing significantly higher energy costs over the colder months, according to fuel poverty campaigners at National Energy Action.
Adam Scorer, the chief executive of the fuel poverty charity, said the higher winter energy costs would “stretch household finances beyond breaking point”.
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Juliet Phillips of the thinktank E3G said: “The root cause of spiking energy prices is our reliance on volatile fossil gas. The government has an opportunity at the forthcoming autumn budget to start to fix our broken energy system. We hope to see the introduction of targeted energy bill support for low-income homes, as well as the kickstarting of Labour’s pledged warm homes plan. Longer term, the UK needs to squeeze gas out of the power system, scaling up investments in renewables and low-carbon energy storage.”
Adam Khan, the principal analyst at the thinktank Common Wealth, said: “With prices likely to remain above pre-crisis levels for some time, the government has a major challenge in making good on its election promise to lower bills through the transition to a net zero power system.”
He said the government’s planned state energy company, GB energy, “can be part of the solution by both lowering and more equitably distributing costs, but to do this it needs greater ambition including a retail arm, more capital, and genuine public ownership. The combined economic, environmental, and political case is now overwhelming.”
The energy secretary, Ed Miliband, said the price cap rise would be “deeply worrying news for many families”. He said: “The rise in the price cap is a direct result of the failed energy policy we inherited, which has left our country at the mercy of international gas markets controlled by dictators.
“The only solution to get bills down and greater energy independence is the government’s mission for clean, homegrown power. That’s why we have hit the ground running, lifting the onshore wind ban, consenting unprecedented amounts of solar power and setting the largest ever budget for our renewables auction.
“We will also do everything in our power to protect bill payers, including by reforming the regulator to make it a strong consumer champion, working to make standing charges fairer, and a proper warm homes plan to save families money.”
