Energy price cap alert: Ofgem confirms bills to rise by 4% for millions of households

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Under the energy price cap, Ofgem sets the maximum amount suppliers can charge variable tariff customers for average usage

Ofgem has confirmed the energy price cap will rise four per cent for a typical household from October, in a decision that lands just as Britons prepare to turn the heating back on.

The new cap takes effect on October 1 and runs until December 31, representing a rise to £1,723 annually, or £60 a year, for the average household, on the current level of £1,663.

Cornwall Insight, whose forecasts are closely tracked in the sector, had predicted a four per cent increase to £1,729 in its final estimate before the announcement; a level that on a unit-for-unit basis would be the highest since July 2023.

The energy price cap is set by regulator Ofgem every three months and limits the maximum amount suppliers can charge per unit of gas and electricity, plus the daily standing charge — it does not cap a household's total bill, which still depends on how much energy is used.

It applies to households on standard variable tariffs in England, Scotland and Wales, meaning anyone who has not switched to a fixed deal, while those on fixed contracts and customers in Northern Ireland are unaffected.

Today's figure is measured against Ofgem's revised definition of a typical household, introduced on July 1 to reflect the fact that average energy use has fallen.

The change also coincides with the removal of VAT on domestic electricity from October 1, meaning the headline number is not directly comparable with caps set earlier in the year.

In reaction to the news, Energy Secretary Miatta Fahnbulleh said that the Labour Government has expanded eligibility of the £150 Warm Home Discount scheme and is doubling down on its Warm Homes Plan to cut costs.

She explained: "Families will be understandably concerned about the cost of energy bills this winter, which is being driven up by the Iran War.

“Energy is an everyday essential and it needs to be affordable for everyone, which is why we have cut VAT on electricity bills from October, to give families some breathing space.

“This has limited the rise in the price cap and follows the £150 in costs we removed from bills earlier this year, and we will keep looking at what more we can do to protect families from unaffordable bills.”

Sebrina McCullough, the director of External Relations at Money Wellness, urged households to check their eligibility for energy bill support schemes.

She said: “People don't budget using Ofgem's typical household. They budget using their own energy bill. Ofgem's benchmark has changed, but your household hasn't.

"If you're already struggling with your energy bills, don't wait until the winter to ask for help. Contact your supplier and get advice early. The sooner you act, the more options you are likely to have."

Neil Kenward, Ofgem’s director general for markets, said: “High international gas prices are continuing to drive energy costs in the UK.

“We welcome the Government’s intervention to remove VAT from electricity bills, without which customers would have faced even higher costs this winter.