Millions of households are facing another increase in energy bills starting today, with experts cautioning that expenses will remain high throughout the upcoming winter season.
The Ofgem price cap is set to rise by approximately 13% due to heightened wholesale costs triggered by conflicts in the Middle East. For an average household using direct debit payment, the price cap will escalate from £1,641 to £1,862 annually.
Despite its name, the price cap does not cap the total amount paid for gas and electricity. Instead, it places limits on unit rates and standing charges, meaning that the actual energy bill is heavily influenced by consumption levels.
Ofgem has adjusted its methodology to reflect reduced energy usage trends as a means of saving money. Under the revised estimates, the April price cap would have been £1,477, while the new July cap stands at £1,663 per year.
Households on variable energy tariffs are protected by the price cap unless they are locked into a fixed deal. Uswitch advises consumers to explore fixed tariffs that could be cheaper than the price cap, emphasizing the importance of comparing options to potentially reduce costs.
The price cap will be effective until October, with forecasts indicating that households can expect bills around £1,849 during that period. Dr. Craig Lowrey from Cornwall Insight highlights the ongoing impact of geopolitical factors on energy prices, warning that the aftermath of conflicts may lead to prolonged effects on households.
Ofgem is scheduled to announce the October price cap by August 26, with expectations of continued challenges in the energy market due to geopolitical uncertainties.