Increased wholesale energy costs lead to 5% rise in price cap
Energy regulator Ofgem has today announced the energy price cap for the first quarter of 2024.
The price cap will increase by 5% on the previous quarter from 1 January to 31 March 2024.
For an average household paying by direct debit for dual fuel this equates to £1,928, a rise of £94 over the course of a year – around £7.83 a month.
The price cap, updated every quarter, sets a maximum that can be charged to customers for energy bills.
Today’s price increase is driven almost entirely by rising costs in the international wholesale energy market due to market instability and global events, particularly the conflict in Ukraine.
The regulator said it will continue to ‘use all levers available’ to ensure costs are spread fairly and customers struggling with bills are supported.
And said it has today further developed plans to permanently remove the so-called ‘prepayment meter premium’ to ensure that prepayment customers are charged the same standing charge as direct debit customers.
Ofgem has launched a ‘Call for Input’ on standing charges running until 19 January, 2024.
Jonathan Brearley, CEO of Ofgem, 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.
“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.
“People should 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.”
TUC General Secretary Paul Nowak said: “This is the last thing families need as we approach Christmas.
“Energy bills are already 50% higher than two years ago. And this year minsters have removed any government support with energy costs— so today’s rise will just hammer households even harder.
“It didn’t have to be this way.
“The Conservatives could have helped bring down bills by imposing a proper windfall tax on the likes of Shell and BP. But they left billions on the table.
“And instead of investing in improvements for draughty homes, they have left people out in the cold.”
Richard Neudegg, director of regulation at Uswitch.com, comments: “This rate increase will bite during the coldest period of the year when households need to use the most energy.
“The price cap will go up by 5% from January due to the increases in the wholesale energy market.
“This means energy bills are likely to be the highest they’ve ever been for most homes this winter. Between January and March, average bills will be £46 more expensive than the same period last year when the government’s Energy Bill Support Scheme was in place.
“With bills so high, it’s important to ensure you are only using and paying for the gas and electricity you need. Tracking your usage can help uncover simple ways to save energy, such as lowering wash temperatures or changing your cooking methods.
“If you’re struggling to make payments, don’t bury your head in the sand. Get in touch with your provider as soon as you can. They should be able to advise on payment plans, as well as any support schemes or grants you may be eligible for.
“Fixed tariffs are the only way to get any certainty about what you will pay for your energy. There are some deals worth considering, but generally open market offers are still limited.
“The price cap is no longer fit for purpose and gives providers little incentive to offer better deals. The system needs reforming to create a more competitive market that also protects households.”
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