Households will begin the new year with a 5% increase in energy bills after the regulator raised the price cap to an average of £1,928 a year for the typical gas and electricity bill.
Ofgem raised the maximum price that energy suppliers can charge their customers from £1,834 a year for the typical household between October to December, after a rise in global gas market prices after the start of the Israel-Hamas war last month.
From January to March the price cap will rise to £1,928 a year, which will determine the energy bills for most households.
Ofgem’s chief executive, Jonathan Brearley, said: “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.
“It is important that customers are supported and we have made clear to suppliers that we expect them to identify and offer help to those who are struggling with bills.”
The regulator set out the price cap rise the day after the Treasury’s autumn statement, which offered a package of tax cuts for companies which plan to make investments. This is expected to be particularly helpful for capital intensive green industries such as solar and offshore wind, which will also benefit from a new exemption from the government’s energy windfall tax.
However, consumer campaigners heaped criticism on the Treasury for failing to put forward measures to help hard-pressed households pay their energy bills or insulate their homes.
Jess Ralston, the head of energy at the Energy and Climate Intelligence Unit, a thinktank, said the government should also be spending more on improving home energy efficiency.
She said: “Millions of people living in leaky homes are facing a bleak start to 2024 with around £700 extra on bills to heat and power their homes. It didn’t have to be this way. The government has presided over a slowdown in home insulation for struggling households during a gas crisis. The PM’s decision to scrap insulation requirements for landlords means renters are now locked into higher energy bills for years to come. The autumn statement included nothing of note on energy efficiency.”
Ed Miliband, Labour’s shadow energy security secretary, said: “While the out-of-touch chancellor tried to pretend yesterday that the cost of living crisis was over, these new figures show the truth: energy bills are rising again to an unaffordable level for millions of families.
“Despite this, the government has absolutely no plan to get bills down, even admitting that their flagship energy bill will not lower bills by a penny. The Conservatives have no clue how to even try and bring down energy bills for British families.”
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The Labour party has promised to tighten the UK’s windfall tax on oil and gas giants and use the proceeds to reduce household energy bills. It also plans to accelerate the rollout of clean energy to reduce the UK’s reliance on volatile fossil fuel market prices.
Concern over rising energy costs has been compounded by the increase in standing charges, which suppliers add to bills as a flat daily fee, often likened to line rental for a phone, to cover the cost of connecting households to their energy supplier.
The energy regulator last week opened a review of standing charges, which for some households have doubled over the past two years. From 1 October the amount these charges add to a typical dual fuel bill rose to above £300 a year – a figure that some argue unfairly penalises low-income households. There was no new increase announced today.
